The Ledger
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Most AI value creation will happen in private markets, not public
“And if you look at what's happening in the private versus public markets now, the size of the winners from a new tech wave, that's going to happen in the private markets.”
AI-native software companies will reach larger market caps than SaaS giants
“And so I have to think that this next wave probably presents the opportunity for this next generation to be much larger than the previous generation.”
Foundation model API providers will eventually operate as a high-margin oligopoly
“I think the market structure will end up sort of like cloud for the models where, you know, cloud costs for the average end customer are fine. And, you know, cloud's an oligopoly and they make high profits. I think the model companies, you know, that serve API…”
Independent AI application software companies will win across almost every category
“We fully changed our mind. I think there's going to be application software companies built on top of models in pretty much every direction.”
Robotics will become the largest category in artificial intelligence within 10 years
“You know, we have not made a large investment in robotics, but I think it's going to be the largest category in AI, B to C, B to B. You know, there's still kind of debate on what the right form factors are. Whether it's at home help, whether it's industrial, l…”
a16z historically refuses to sell secondary shares in late-stage portfolio companies
“We could, but we historically have not. And so, you know, for the most part, for the companies that have decided to stay private, we've been really excited to stay in them, keep backing them. And that's probably the strategy that we'll, we'll continue to have.”
Top high-growth tech companies will trade above 6x public revenue multiples
“I also don't think that every great high growth company will end up trading for six times in the public markets. There are some that are going to trade higher based on very high growth rates or high cashflow.”
Gross margins for AI applications will rationalize and increase over time
“The history of technology inputs would suggest that the margins will rationalize and the margins are going to go up.”
George: Celonis will deliver sustained high growth without aggressive cash burn
“I think their business model is fantastic. I would view their future as very elevated levels of high growth with high returns on capital, and, you know, there's not some looming intense competitive threat that makes them think that they should aggressively go …”
a16z Growth targets 3x to 5x returns with a 10% loss rate
“We target three to five X returns over five years in aggregate, but we place So we're constantly asking, how could this investment be worth 10 X plus? And we focus probably more of our effort on that than around the downside. You know, I always ask my team whe…”
a16z Growth uses 5-7 year horizons to absorb entry valuation errors
“So we think in five to seven year terms and try not to worry if we're off by a year or two on the valuation, like that's a risk that I'm willing to take.”
Autonomous driving and robotics will be the largest markets created by AI
“Like I think autonomous driving and robotics are maybe the mother of all, you know, markets that are coming on AI.”
George: Front-end engineers doing design expands Figma's market by 10x
“Our view was that all front end engineers in the future will engage in design, and this is 10 X plus bigger in terms of market opportunity than just defining what they do in the design space.”
a16z Growth targets 30 portfolio companies with $50M to $300M checks
“For our current fund, we'll target about 30 companies, so investment size average around a hundred million dollars. Again, that's a function of the market opportunity, and when is the right fit for You know, the range is a little wider than that. It's anywhere…”