Effects of Hype on Technology Investment

I took a pill in Ibiza. Some thoughts on Hypey AI BS and the human side of investment decisions Some percentage of these AI investments might make sense. AI is a big deal. BUT I think the majority of these overpriced over-hyped rounds are happening for a different - much more human - reason altogether. Over the past 5-10 years, a generation of VCs was trained to invest quickly in whatever was hyped up and hot. Potential exit valuations were always assumed to be in the multiple billions. Diligence didn't matter. Valuation definitely didn't matter. What mattered was chasing heat. In today's more sober climate, that style of investing is harder to do. Investing in anything when you are not experiencing that frenzied high is impossible for a generation of investors who only invested while drunk. Doing it sober is not fun but is - instead - scary. So a whole generation of investors is incapable of investing while sober; unable to invest in the face of real fear and a real assessment, acceptance, and acknowledgment of risk. These investors gravitate towards AI deals not because of a rational analysis of the potential exit outcomes but because of the hype and excitement that makes that analysis appear unnecessary. The hype zone is their safe zone. If they can believe for a second that the company could achieve a $10B outcome because of the "power of AI" they can - for that instant - put themselves back in the hype zone and - high on a dream - get comfortable with an insane valuation. We are witnessing the "power of AI" - not just to drive huge economic outcomes for investors but to divorce investors from economic reality. Too many investors are still addicted to the sugar rush of irrational exuberance - and that high is only available today in AI. In short: Hypey AI BS has allowed some investors to return to their psychological comfort zone for deploying capital, one in which irrational exuberance allows risk to be ignored instead of priced.

Some thoughts on the state of the AI Industry today: Hype is omnipresent in the rapidly evolving world of Artificial Intelligence (AI). Every day, new breakthroughs and advancements are touted as the next big thing, promising to revolutionize industries and solve complex problems. However, amidst this excitement lies a significant danger: the risk of being misled by the noise and falling victim to inflated expectations. One of the primary dangers of AI hype is the potential for misallocation of resources. Companies and individuals, driven by the fear of missing out, often invest heavily in AI technologies without fully understanding their capabilities and limitations. This can lead to wasted resources and failed projects. For instance, the AI bubble of the 1980s, known as the "AI Winter," saw massive investments in AI technologies that were not yet mature. Many investors suffered significant financial losses when these technologies failed to deliver on their promises. To avoid falling prey to the hype, it is crucial to filter out the noise and focus on the signal – the true, sustainable advancements in AI. Here are some practical steps to help navigate this landscape: - Do Your Research: Before investing in or adopting any AI technology, conduct thorough research. Understand the technology's underlying principles, its current state of development, and its realistic applications. Be wary of exaggerated claims and seek information from reputable sources. - Look for Proven Use Cases: Focus on AI solutions that have demonstrated success in real-world applications. Case studies and testimonials from credible organizations can provide valuable insights into the technology's effectiveness. - Adopt a Skeptical Mindset: Approach AI innovations with a healthy dose of skepticism. Question the feasibility of grand promises and seek out expert opinions. Remember that if something sounds too good to be true, it probably is. - Learn from History: Historical examples, such as the Dot-Com Bubble and the AI Winter, serve as cautionary tales. During the Dot-Com Bubble of the late 1990s, many internet companies with unsustainable business models received exorbitant valuations, leading to a market crash when reality set in. Similarly, the AI Winter reminds us of the importance of aligning expectations with technological realities. In conclusion, while the potential of AI is immense, it is essential to navigate its landscape with caution. By filtering out the noise and focusing on substantiated advancements, we can harness the true power of AI without falling victim to the dangers of hype. Let's learn from the past and approach the future of AI with informed optimism and strategic discernment.

Founders - planning to raise VC money every 18 months is planning to fail. Although if you're an AI-native company, maybe it's a little more realistic. Every quarter we track the time between venture rounds. In order to strip away noise, we remove all extensions / bridges / other "creative" financings. So the data below only looks at primary rounds for software companies in the US. And we did a lot of digging on which companies are AI and which are not. The definition seems to always be changing, pls don't throw tomatoes if ours doesn't match yours completely. 𝗙𝗶𝗻𝗱𝗶𝗻𝗴𝘀 • Time between rounds has gotten considerably longer in the past two years.    • The median time from Seed to Series A in 2025 is 2.2 years. For AI companies that drops to 1.9 years.    • The median time from Series A to Series B in 2025 is 2.7 years. For AI companies that drops to 2.2 years.    • Lots and lots of companies are raising bridge capital. Is this a good thing? ...😬 Our current VC hype cycle around AI impacts all sorts of round dynamics. AI companies tend to raise more capital, at faster rates, and higher valuations then non-AI software companies. In fact, I'd bet that in 2 years or so we stop making this distinction and assume if you're building software you're using AI. BTW seeing the time between rounds rise is not 𝗻𝗲𝗰𝗲𝘀𝘀𝗮𝗿𝗶𝗹𝘆 a bad thing. Many companies are probably being more judicious about approaching VCs and are building well with the capital they have. Of course many are still desperate for cash and feeling anxious about the next capital infusion. Good luck out there #startups #founders #VC #Seed #SeriesA