Gurley reports AI deals average $1 billion valuation and $120 million round size year to date.
“Year to date, I think 200 deals, 22,000,000,000 of investment, average valuation, wait for it, $1,000,000,000. Right? Average round size, 120,000,000.”
Gurley calls Inflection's implosion after Greylock's $1 billion pre-money round a warning sign for AI valuations.
“Right? And this is a warning sign that you can't just pay any price for any deal in the AI sector and get paid.”
Gurley argues cloud credits given as AI investments create low quality revenue for big tech companies despite auditor approval.
“From the big company players' side, I would just say definitively, this could get me in trouble, but this is low quality revenue.”
Gurley says cloud credits given as investments create low quality revenue despite auditor approval.
“Like this is flat out low quality revenue and I'm certain that they've got their auditor to sign off on it.”
Gurley says cloud credit investments use balance sheet to drive income statement, which should be prohibited.
“Well, yeah. I mean, a big skeptic would say you're using your balance sheet to drive your income statement, which should be a no no.”
Gurley uses hypothetical Ultra Hosting Company to illustrate how credits-as-investment creates revenue without real customers.
“They built a big server farm and their only customers they have are companies that they went out and gave credits away to as a form of investment.”