Ep 128: AI in VC – Changing the Investment Landscape

October 23, 2023

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Overview

Artificial intelligence (AI) continues to revolutionize industries, and the realm of venture capital (VC) is no exception. As businesses strive to stay relevant and competitive, integrating AI into their operations becomes crucial. In this article, we delve into the impact of AI on the VC landscape, its implications for startups, and the changing dynamics brought forth by generative AI tools.

Embracing AI in VC: A Paradigm Shift

The integration of AI in VC is rewriting the rules of investment. Forward-thinking VC firms are now focusing their investments on AI-related companies. By recognizing the transformative potential of AI, VC firms are tapping into new horizons of growth and innovation.

Startups and the AI Advantage

The question arises: should startups incorporate AI into their business models? The answer lies in the realization that AI can significantly enhance productivity, efficiency, and decision-making processes. Startups that embrace AI-powered technologies gain a competitive edge, enabling them to improve their operations, deliver superior products or services, and scale their businesses at an accelerated pace.

The Role of Generative AI Tools in Startups

Generative AI tools, such as ChatGPT (Generative Pre-trained Transformer) models, are revolutionizing startup operations. These tools allow teams to optimize spending, allocate resources effectively, and drive customer success. With generative AI, startups can streamline their operations with leaner and smaller teams, ensuring productivity and cost-effectiveness from the very beginning.

The Evolving VC Decision-Making Process

AI-enabled tools are reshaping the VC decision-making process as well. By leveraging generative AI tools, VCs can enhance due diligence processes, improving their ability to identify promising startups and make informed investment decisions. High-performance startups armed with advanced technology often receive increased attention from VCs, presenting them with favorable investment prospects.

Overcoming Challenges and Capitalizing on Opportunities

Despite the undeniable potential of AI in VC, there are challenges to navigate. For instance, finding employees with expertise in AI and human resources can prove challenging, but the demand for these skills is expected to rise. To stay ahead, business owners and decision-makers should focus on cultivating a workforce that not only embraces AI but also understands its applications within their specific industry.

Conclusion:

As AI continues to reshape the business landscape, the VC industry must adapt to stay relevant. Startups must seize the opportunities presented by AI to optimize their operations, enhance decision-making, and forge a path towards growth and success. VC firms must leverage generative AI tools to drive their investment decisions, identifying high-performing startups armed with cutting-edge technology. By embracing AI and capitalizing on its transformative power, businesses can navigate the ever-changing VC landscape and secure their positions in the future of innovation.


Topics Covered in This Episode

1. Impact of AI on the venture capital landscape
2. Impact of generative AI tools on startup founders
3. AI integration in startup operations and processes


Podcast Transcript


Jordan Wilson [00:00:18]:

How is artificial intelligence going to change the venture capital landscape? Our our only, you know, our VC is only gonna be investing in everything AI. Should you be throwing artificial intelligence into your company if you're Startup founder, entrepreneur. I don't know. I don't have all of the answers to these questions, but I have a very special guest today that can help us figure that out. So, welcome. This is Everyday AI. This is your daily livestream podcast and free daily newsletter helping everyday people like you and me Not just understand what's going on in the world of AI, but how we can actually use it. So, if you are interested in the ever changing start up landscape, You know, and specifically even how artificial intelligence is really helping to form and shape, the future of startups.

Jordan Wilson [00:01:09]:

Today's episode is for you. So if you are joining us live, thank you. Make sure to get your questions in now. You know, what do you want to you, what what do you want to know about this changing landscape, in venture capital and artificial intelligence and start ups.

Daily AI news

So before we get to that, let's first talk about what's going on in the world of AI news. So first, Britain's AI summit is reportedly not off to a great start. So the UK government, we talked about this last week on the show, is organizing a global summit on AI governance with a focus on potential AI, driven problems. Right? So This narrow focus, however, has excluded some important voices from UK's own AI industry and has raised some concerns about the inclusion of Chinese officials.

Jordan Wilson [00:01:54]:

So this limited agenda for the summit has already drawn criticism for ignoring more real immediate, kind of just real world risk of AI in hindering, the UK's ability to compete in the industry. So already a lot of criticism Toward this, Britain's AI summit that was supposed to bring everyone together, and now it's already starting to draw a little bit of controversy. Alright. Next, lot of Apple news over the weekend, y'all. So we're we're gonna get to the 2 biggest ones. So, first, new report, has said that Apple's, some some Apple insiders are leaking the company's AI plan, for the next iPhone. So, AI or sorry. Apple, Rather, maybe playing catch up to some of its rivals.

Jordan Wilson [00:02:37]:

So Google's Pixel 8 and Pixel 8 Pro, that were recently released are AI first Smartphones with AI integrated both into the hardware and software. And this has kind of left Apple scrambling a little bit to catch up in the AI race, and they are planning to test some new AI capabilities in the coming months before potentially releasing, some of these AI software features in Ios 18. That's not the only Apple news. We'll cap it off with, some more Apple news. So some new reports say Apple has a, quote, lot of anxiety About the Gen AI momentum. So Apple was official, officially, initially caught off guard by sudden focus on AI in the tech industry, and And now they're kind of working to catch up. So the company's get this y'all. The company's AI team, according to recent reports, has allegedly A budget of $1,000,000,000 to be working on generative AI.

About Leon and his background


Jordan Wilson [00:03:34]:

So Apple is exploring different ways to Integrate generative, generative AI into various applications from development tools to customer service tools as well as implementing AI to improve user experience. I don't know about y'all, but, like, $1,000,000,000 budget, like, that's wild. Right? Alright. But, let's let's get back to why you joined us today. You probably are here hear and to talk about artificial intelligence in the VC world and kind of the ever changing, landscape. So, with that, please Help me welcome to the show. There we go. We have, Leon Eisen, an inventor, serial entrepreneur, and venture partner of Network VC.

Jordan Wilson [00:04:15]:

Leon, thank you so much for joining the Everyday AI Show.

Leon Eisen, PhD [00:04:19]:

Hi, Jordan. Thank you very much for inviting me. I am really happy to be here. I I, follow your everyday AI almost everyday, and I like it. A a lot of my friends who are there, so thank you for inviting me.

Jordan Wilson [00:04:33]:

No. Absolutely. Hey. Speaking to friends, we have some of our everyday AI regulars joining us on the show. So Brian saying good morning. Doctor Harvey saying he's catching

Leon Eisen, PhD [00:04:42]:

the neurotaxis.

Jordan Wilson [00:04:43]:

I have it. We have we have the usual crew. So, hey, if you have any questions, for Leon just about AI in In the venture capital industry and how it's changing, please get those questions in now. So, Leon, maybe let's start start at the top. Can you tell everyone a little bit, about kind of, what you do, because that's a lot. Inventor, serial entrepreneur, venture partner. What is it that you do, with network VC?

Leon Eisen, PhD [00:05:09]:

Yeah. But I would like to start from the beginning, I would say. So I have PhD in physics and, did my postdoctoral research in quantum computers, specifically laser cooling. And this has, created some basis where I am today. So I was working, like, in then I left, science, Spent for a long time and became engineer and then moved to entrepreneur entrepreneurial area. And in 2009, I was in the middle of Crisis. I, succeeded to raise the 1st $1,000,000. People laughed on me, so I was almost in a You know, level of bankruptcy, but it was very difficult as I burned my boats and Finally succeeded and invented the word first of the clear pulse oximetry monitor at risk long before everybody else just got into this Market today, people use my device like a predicate, and it's successful in the market.

Leon Eisen, PhD [00:06:11]:

And for 10 years, I was managing Occitan Medical, like CEO. I was founder of this company and get, this company to to somehow success. So I learned a lot through my, experience for a long time. And somehow all, all planets align in one. I think I should get into investment period because I didn't touch it yet. And I all the time, I I was sitting in front of investors, and I learn how they think. And then I get into their, play into their cheer, just sitting in the onto their chair. Now I understand how wrong I was then.

Leon Eisen, PhD [00:07:00]:

I I raised a lot of millions, but, actually, all the time, Today, I understand how I was wrong with my, approach to how investor really think. Now I understand this. And now I teach a lot of, startups. I'm not only investing. I'm teaching. I'm a mentor of founder institute. I'm a mentor of, many actuators. And, really, the main problem that entrepreneurs entrepreneurs, They're not ready to raise money.

Leon Eisen, PhD [00:07:35]:

I didn't see any entrepreneur ready to raise money. 99% of entrepreneurs Cannot give you elevator pitch for filters even 60 seconds. And somehow, they rise. They rise. And this is very interesting stuff.

Will AI help or hurt us?


Jordan Wilson [00:07:54]:

So so, you know, Leon, you obviously have an impressive in, a background from all different angles, You know, in, you know, venture capital, you know, entrepreneurship, and even the, kind of being an inventor yourself. But let's just first kind of get a general understanding. So when we're talking, about AI, I'd love to get your, kind of vantage point of this, you know, because you do have a background that's more seasoned than most and and more well rounded than than a lot of, you know, people that we talk to. But, you know, when when we talk about a general understanding of artificial intelligence, you know, what are your thoughts on that? You know? And Do you think it's something that's going to eventually bring us together, or could AI be something that, you know, could kind of fracture us and, you know, also with different startups in the industry as well?

Leon Eisen, PhD [00:08:43]:

Yeah. Very interesting question. Thank you very much. First of all, we have to understand what is it AI. I know it's it's it's interesting to tell you AI, everyday AI, to to talk about what is it AI, but I want to share my understanding. So as you know, IBM, 50 years ago, defined AI like software that mimics decision making and the problem solving, by by the, human mind. I consider AI like some kind of mirror of the human mind. Neuro.

Leon Eisen, PhD [00:09:19]:

So way how we understand ourself because we are like a war of humanity, Totally unconscious. And how to bring us to consciousness? That's why we have wars. That's why we have injustice. That's why we're in in this in a, position where we are today in our world. And my view that AI should help us to understand ourself and Make bring our to some conscious level to awareness about who we are and what we are going to do To continue to thrive like humanity, like civilization. And this is, my main mission. When I'm investing in AI, I always think about, okay, there is a specific problem AI is solving now, but how this problem look like a par looks like a part or the general vision I have to where we're going. And so I developed interesting approach.

Leon Eisen, PhD [00:10:33]:

There is a, AI agent, and we challenge this AI agent. Some people, tell us that it's disaster. So AI will kill civilization. Other people, think differently. They are optimistic. They think, okay. AI will help to bring civilization to the next level. I don't know.

Leon Eisen, PhD [00:10:59]:

But to, my, my understanding, human has some DNA which connected to, to the quantum field, I would say. To the field, maybe there is a life beyond our physical life. And definitely, we have connections to something that gives us power, gives us intuition, And gives us something that, I'm not sure any machine could have. So when people ask me, oh, AI going to kill humanity because AI outperform humanity and will manage humanity back. And I answer, okay. We all know it's proved that when people die, their soul comes out of the body, And people see themselves from the top. Now my question, is machine can do it? Dying. Never.

Leon Eisen, PhD [00:11:58]:

So I AI, asymptotically, will continue to be close and close to human knowledge. I I call it ultimate knowledge. Yeah? Mhmm. And human is growing. AI continuously will approach this growing, but will never cross it. This is my understanding of a place of AI in our life.

AI's impact on startups


Jordan Wilson [00:12:22]:

Yeah. And, Leon, you bring up A lot of interesting points there. Right? Because there is definitely, you know, not just in the start up landscape, but I think in the general population as well. You know? Some people are, very, you know, kind of looking forward to integrating AI into their everyday life. Some people aren't. You know? Some people are are hesitant, and they say, oh, you know, I don't I don't trust it, you know, or, hey. This could take my job, so I'm just not I'm gonna stay away from it. But, you you know, I I specifically wanna even ask you about how this is, how AI's rapid implementation into our daily lives is changing the startup scene because it seems like from my vantage point over the last maybe year or 2.

Jordan Wilson [00:13:07]:

Now every single startup that I see is somehow, you know, integrating AI into their product, into their service. Have you seen this, and is this a a good thing or a bad thing for the startup landscape?

Leon Eisen, PhD [00:13:22]:

This is very important thing. Today, I do not consider any startup if startup doesn't have AI elements or in their operations or in their product. It's very important because, for us, for investors, We are we're we're keen to see some, some optimization of money spent. And today, if you cannot spend money and optimize this spending, You will not succeed. You will be outcompeted by other startups. So it's very important, and this is what I teach startups In my portfolio and, like, a mentor and adviser, the first thing I start, let's, take a look on your, operations. Like, let's take a look on your business processes. How are you doing, Customer success.

Leon Eisen, PhD [00:14:27]:

How are you doing, marketing and sales? I think today AI should be involved and introduced in all these operation stuff. And if startup doesn't have this, I'm sure I'm not going to invest at all. I'm going to consider this startup at all, But I'm going to help this startup to to implement it. Yes. I'm going to help. But, again, It's too early to say how many start ups will implement. But in 2004, 24, I think the most important part of Investment dynamics into start ups is to have optimal, processes To, that enable to invest less and to get a return on investment much more.

Jordan Wilson [00:15:20]:

You know, Leon, something something I'm always thinking of specifically when it comes to startups is it seems like, you know, kind of pre, we'll just say pre ChatGPT because I think that kind of, you know, put this gen AI, kind of onto the scene. But it seemed like, you you know, Something you would always see startups doing is is investing heavily in maybe certain areas that they didn't need to. You know, how kind of so Going back to what you just said about, you know, startups needing to work generative AI with with their operations, business processes, customer success, Is this changing how even start up teams should should be operating? Do they need to have, you know, these huge 6 figure, you know, development teams, even when they're very small, working on an MVP, is this gonna make leaner, you know, smaller startups able to compete whereas, you know, maybe 3, 5 years ago, they needed a large team.

Leon Eisen, PhD [00:16:18]:

Absolutely. This is exactly the point because when we invest, we're looking for, high performance. And we are looking for having this startup on the of their development and technology today. Definitely, If they have, for example, have 5 salespeople and they don't use a CRM that includes, very simple CRM like Excel or something like this. Definitely, I'm not going to consider this startup like, like, a potential winner. The problem is that it's not, market is not ready. Not a lot of HR in, AI So it's quite difficult to hire people who understand this. But, also, my approach, I hire in my companies, I usually hire junior people.

Leon Eisen, PhD [00:17:13]:

I never hire high level professionals. Okay. I can like adviser. Right? Like adviser. Very good. So my approach and this is what I ask start ups to do. So you should have, some junior that has a fresh mind and could learn everything from the beginning without some garbage that this guy bring by their himself by the age of 50. I know it by myself.

Leon Eisen, PhD [00:17:44]:

It's a lot of garbage that really just tarps, and you have to remove this garbage. Not not everybody can do it. So you have to have the fresh mind. And, then you have to advise, to to hire adviser, very professional, very senior guy who can help these young guy to grow. So kill 2 rabbits. 1st, company will thrive in this case. And second, this guy, young guy has a huge opportunity to learn quickly and to grow in his career.

Jordan Wilson [00:18:20]:

I love this. Yeah. I mean, what? Literally, as I say, I love this. Tanya just said, comment and said, I love this. Someone who is a visionary, he can spot potential. Absolutely. So thank you. If you are joining us, please get your questions in.

What AI tools are VCs using?


Jordan Wilson [00:18:33]:

Doctor Harvey Castro saying great discussion. I'm working on my startup in AI and health care. But a question for you here, Leon. So someone asking, you know, maybe what AI tools, are even VCs using these days? So I I I love that. So we're talking about, You know, how AI is changing, things in for, startups. But, you know, what about for VCs? Is is it changing are are these AI tools changing How you operate and what tools are even VCs using that are kind of, AI tools.

Leon Eisen, PhD [00:19:02]:

Absolutely. Today, many using AI tools and a lot of startup developing due diligence AI tools for VCs. I know. I just Got, recently some pitch deck, a very interesting startup, which, enabled VC to to To make due diligence for a couple of hours instead of instead of couple of weeks. So it's it's amazing opportunity for VC, to to to have the right decisions because usually we decide on combination of emotional and analytical stuff. And, AI doesn't have emotional stuff. For example, in network VC, we put specific, specific plan On investments. So we try to eliminate emotional investment.

Leon Eisen, PhD [00:19:52]:

We try to we we invest in company having some numbers And figures already done, like $1,000,000 or $2,000,000 revenue, high growth, some very, Top 40, venture capital invested before. This just eliminate, some emotional Stop. But, again, just couple of days ago, I had very interesting conversation with, Interesting accelerator and venture found. It's starter net starts. I I like, this guy. I like this, their approach, And they use a very sophisticated algorithm, for, for for startups, Due diligence.

Advice for startups


Jordan Wilson [00:20:44]:

You know, as we look forward, so if if maybe a startup founder is is hearing this and they're saying, Oh, you know, maybe we're not using AI in all of these places that we should. Maybe we are still, you know, wasting, you you know, some of our valuable time and resources by not being, efficient with generative AI. Leon, maybe what are, you know, a piece of advice or two that you might have, for for people working in start ups on if they are kind of struggling to get the most out of Gen AI, how can they do so?

Leon Eisen, PhD [00:21:20]:

People working in startup do not have struggle with using AI. You struggle of using AI, they don't have to work in startup. So startup is a very important filter of people who can and who cannot. Able, enable, or or not. So, piece of advice or, or hire mentor. This is very important. Today, for example, recently, I I I was a judge in 1, in 1 competition, And it was a clear gap between startup, founder who has mentor And startup founder, I call them asshole, who thinks they know everything. They don't need anybody, to help them, then they to me back and say, okay.

Leon Eisen, PhD [00:22:08]:

I'm out of money now. Now what I have to do? I said, okay. You should come to me a year ago. Why why why didn't? So this is very important. Startup founder should understand if he Struggle with something, not not about the eye, exactly, with something, with, I don't know, personal issues, with, money issues, With, management issues, with everything, with culture. It's very important to build appropriate culture. I have a specific course about how to build the culture. Based on quantum business thinking, this is my methodology I developed specifically for start up growth.

Leon Eisen, PhD [00:22:48]:

I invite people to my website, eizen loan eizen.com, so you will be you will learn very interesting and unusual things there. So usually, I tell I I I encourage such entrepreneurs, to find mentor. A lot of free mentors around. Go to accelerator. Take a mentor. Learn. Because I I said before, 99% of Startup founders cannot give you elevator pitch. I'm not talking about that they have to do it in the middle of night When you wake up and they have to do it immediately, they cannot do it after, I don't know, 10 minutes of conversation.

Leon Eisen, PhD [00:23:29]:

And that's why pitch deck is totally wrong because usually elevator pitch you build from the pitch deck. First, you build a pitch deck. You identify your objective. You identify your key results at the end of your journey start up journey to understand what kind of exit you have to have. And then they don't know how to to make elevator pitch. So if people cannot give me elevator pitch, it means I don't have to open pitch deck because pitch deck is totally wrong. This is what I understand. Because they didn't get anything Through writing this pitch deck.

Jordan Wilson [00:24:07]:

Yeah. It's it's it's so interesting because I do think, you know, as we start to rely more On these generative AI tools, it does take away, I think, you you know, some of the the start up founders' ability To to think and to rationale and to reason and to communicate. Because if you do come overly reliant on these AI tools, It almost comes harder, I think, Leon, to maybe, you know, quote, unquote, show your work or, you know, hey. How did you come from, You know, from point 1 to point b, well, if you relied on, you know, 2 or 3 Gen AI tools to do the heavy lifting, That's okay, but you have to be able to like you said, you have to be able to still deliver the pitch and to, explain the rationale behind, the decision makings.

Leon Eisen, PhD [00:24:55]:

Exactly. As as, you know, as I said before, AI is not me. IBM said. AI, by definition, should mimic decision making. But should somebody should make decision making. So AI minutes, you make it, and you have to calibrate your understanding of AI In order to deliver what AI gave you.

How AI is changing venture capitalists

Jordan Wilson [00:25:20]:

Absolutely. So, you know, we yeah. We've we've talked about a lot in today's show so far, you know, everything from some best practices on how startups can, you know, better use generative AI tools, How the landscape is is changing a little bit. But one thing I I kinda wanted to to end today's show on is is how is, AI changing everything for VCs for, you know, venture capitalists, maybe people in private equity. So, you know, you kind of gave one example of, you know, there's startups even now working on and Generative AI tools to help VCs kind of, you know, do their due diligence a little faster. But, you know, outside of that, you know, kind of, specific example, How even for you, how is generative AI changing the role, of a venture capitalist and, you know, private equity and these companies that are investing in

Leon Eisen, PhD [00:26:13]:

dramatically. For me, dramatically. Because first of all, it accelerate my job. Very much accelerate. And second, it accelerate my understanding what I'm looking for because, again, I can use AI For my decision making. It it's very difficult to to to think out of the blue. Okay. Here is a list of cons.

Leon Eisen, PhD [00:26:34]:

Here is a list of pros. No. I asked AI. What do you think? But very important to, to make a correct prompt. But actually change, my Even change my understanding how I'm going to invest, how I'm going to build the company. And, Yeah. It's it's it's critical, but I cannot consider how AI held VC VC industry without considering All the industry. As you know that, Price Water Waterhouse, said that by 2,030, AI will increase our industry growth by 14%.

Leon Eisen, PhD [00:27:16]:

So all goes together. It's like in frontale, you know, like in front. All goes together. So AI introduction in horizontal and vertical vertical in industrial, enterprises. And, whole industry is growing, and venture capital should thrive because optimization of of startups, optimization of investment, make automation of investment tools, reducing some emotional, components to some level. It's important, but to some level For people who cannot keep their emotions. But in any case, what I have to say by conclusion, Do not think that AI will help entrepreneurs. This is what I tell to entrepreneurs.

Leon Eisen, PhD [00:28:10]:

AI won't help you Unless you have created wow effect. It doesn't matter using AI, Something else, blockchain. It's just finally, it will be commodity. It's commodity. And it it yeah. It's just tool. You, like a human being, you should create, craft, wow, effect to success in your business.

Jordan Wilson [00:28:39]:

So much so much great advice, you know, Leon. So thank you. Like I said, we we covered So many things, on this. Thank you so much for coming on, the Everyday AI Show and just sharing about, kind of AI's, Impact in venture capital. We appreciate your time.

Leon Eisen, PhD [00:28:57]:

Thank you, Jordan. It was a great conversation. Thank you.

Jordan Wilson [00:29:01]:

Oh, agree. And, hey, There was a lot. You know? Leon mentioned, you you know, his website. So make sure you also go to your everyday AI.com. Sign up for the free daily newsletter there because we're gonna be recapping not just everything that that Leon talked about, but there's gonna be a lot more. So sharing some different insights, and and really helping you all unpack this extremely valuable conversation. So, thank you for joining, and we hope to see you back for another episode of everyday AI. Thanks y'all.

Leon Eisen, PhD [00:29:30]:

Thank you.

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