2084: VC dry powder and AI
Venture Capitalists are sitting on a massive pile of capital, and the only logical sector they can invest in is AI
A pitchbook article I read recently pointed out the fact that VCs have been sitting on an extrodinary amount of “dry powder” or uninvested capital. Now of course, this is due to both the previous bull market having made fund raising super easy - just point to the mad returns and wave your hands about a bit - and the recent collapse of that same bull market with the rise of the federal reserve rate, high inflation, and the collapse in both the stock and bond market, along with flagging consumer demand leading to VCs being loath to commit to deals in the latter half of 2022.
So essentially, massive fund raising at the start followed by no spending at the end, and thus this massive pile of money sitting around. But of course, capital cannot merely sit around, it must be spent, especially capital given to venture capitalists. They must as the name suggests, spend it on ventures.
Now most of the traditional sectors of VC splurging are not doing that well. Internet and social media firms are cutting employees, Web3 is completely dead in the water and the continuing supply shocks make manufacturing even more expensive than it usually is. The only real growth sector at the moment is AI, and given the recent explosive popularity of ChatGPT and Midjourney, there’s a lot of interest and funding being made available to AI startups. Microsoft, for example, just invested 10 billion dollars into OpenAI. And this is just the start. Expect to see a lot more investment in this specific sector in the next year as VCs begin to spend their capital and the other sectors become more unappealing. This is the year to start an AI startup, there’ll literally never be a better time to do it and become part of the future.