Silicon Valley investor Vishal Verma speaks about the AI boom, venture capital’s funding glut, and the next big wave of frontier tech, from space to defense.
From billion-dollar IPOs to trillion-dollar capital surpluses, Silicon Valley is once again in the grip of a fever pitch; this time fueled by artificial intelligence. In the second part of his interview with The American Bazaar, Edgewood Ventures Managing Partner Vishal Verma speaks about the tech world’s most talked-about trend. From OpenAI and Anthropic to the surge in retail investor appetite, Verma offers a candid take on what’s driving the current hype, and what happens when it fades.
Read the first part of the interview, “From family office to fund of funds: Vishal Verma on investing with access, patience, and a global perspective.”
The American Bazaar: The buzz these days is in AI. Are we genuinely in the middle of a major technological shift?
Vishal Verma: AI is the hottest thing right now. Everyone’s talking about it. You’ve got big names like Anthropic, OpenAI, and Mistral. Some amazing companies are emerging in this space.
But let’s be honest: this party won’t last forever. There’ll be a new buzzword soon, a new fad. That’s how technology works. It’s like fashion; here today, gone tomorrow. That said, AI isn’t exactly new. It’s been around for 40 years. It just keeps coming back in vogue.
So that’s number one. Point number two is, just think about what AI is. AI is nothing but a technology. I’m dumbing it down, but do you remember when the internet came out? Remember HTML? In the late 1990s, people used to charge $400, $500, $600 an hour just to build a website. And people were blown away: “Oh my God, you can build your own website!” And it would cost you $10,000, $15,000, $30,000 — sometimes even $100,000 — to build a site.
Then e-commerce came along, and it was like, “Holy crap, you can actually buy stuff online!” That was a huge deal. You can build a full e-commerce website on Wix for $200 a year. Not per month—per year.
So, I’m drawing a parallel between HTML back then and AI now. I’m not saying I’m dumbing down AI, but AI isn’t a product, it’s a service, a means to an end. You can use AI for patent applications. All my LinkedIn posts, for instance, are tweaked with AI. What used to take hours now takes seconds.
There’s a perception among some investors that AI is overhyped. Do you agree with that? You’re in the heart of Silicon Valley, where things are actually happening.
Well, it’s a cycle, right? This always happens. The reason people call it hype is because the money supply in the Bay Area is just so enormous. And what does that mean? It means there’s a ton of capital, and not enough entrepreneurs to back.
Let me give you a few examples. I’m an investor in Lightspeed. In 2022, they raised $7.25 billion. Their first fund, back in 2000, was about $400 million. That gives you a sense of the scale we’re talking about.
I was speaking to Hemant Taneja, CEO of General Catalyst — another major venture fund — a couple of years ago. He told me they were trying to close $5 billion. They ended up raising $8 billion.
So what happens is: with all this excess capital coming into Silicon Valley, and even into New York and other parts of the U.S., that money has to find a home. And yes, it’s cyclical. For every OpenAI, there are a thousand AI startups that die.
But look at the ones that hit. Three years ago, no one had heard of OpenAI or Anthropic. Today, Anthropic has raised a few billion at a $65 billion valuation. They went from zero to $4 billion in revenue in just three years. OpenAI went from zero to $10 billion. That’s why they closed funding at a $300 billion valuation recently.
When I started my career, raising a $400 million fund was massive. I was just talking to a VC yesterday about how much the landscape has changed. Back in 1999, when Nvidia went public, it did so at a $500 million valuation. Jensen Huang was worth maybe $20 to $30 million after the IPO. That was considered huge.
Just for comparison, back then most semiconductor companies were going public at $200–300 million valuations. Not a billion, with an M, as in Mary.
Today, companies are raising that in single funding rounds. Our family’s first investment was in a Sequoia fund in the late 1990s. I recently came across the fund documents — had them in a three-ring binder on my father’s bookshelf. It was like a fossil — an incredible snapshot of what was happening at that time.
Kidding aside, I always say we were still using AOL accounts then. We had fax machines —these weren’t Laserjets. They were the kind where if you faxed something and someone faxed it back, it was just a blur of ink and perforated paper.
But more importantly, there was this amazing letter in the binder — from 2 partners from Sequoia to my father — talking about how Silicon Valley was “awash with capital.” Sequoia was closing the largest fund in its history at the time: $339 million. And today, that’s a Series B round in some hot startups. And now Sequoia manages $20 billion in a single fund. B as in boy.
So yeah, “awash with capital” has a completely different meaning today. To answer your question: Yes, there’s hype. But here’s why: 1) there’s a huge amount of money in the system, 2) that money drives up valuations, and 3) wealth dynamics in the Valley have changed dramatically.
Just think: Jensen Huang made $20–30 million from a blockbuster IPO in 1999. Today, that won’t even get you a decent house in the Valley. So the dynamics have changed.
You mentioned that it’s cyclical. You know, back in the dot-com bubble days, the joke was that you didn’t need a business plan or even a spreadsheet. You could scribble something on a napkin at a coffee shop and still get funding.
It is still happening that way. Because of the excess supply of capital, a fund like Sequoia’s, which used to be $400 million, could write a $500,000 check to Yahoo or a $2 million check to Google, like they did. Today, that’s not enough. You have to write a $30 million check to a company like Google, or $100 million to hold your position in something like Yahoo.
Again, because there’s just so much capital, VCs are rushing to get the check in, just to be in the deal. Early-stage startups? They’re still getting funded on business plans scribbled on napkins, just like you said. But later-stage companies have to perform. I gave you examples, Anthropic and Glean. You saw Glean’s financing at $7.2 billion.
It’s about understanding the dynamics. The public markets are now supporting this surge. In just the past week, we’ve seen several major IPOs. We were part of the Circle IPO. We’re also in Wiz, which was acquired by Google. We’re in Moveworks. Hopefully, that money comes in by the end of the year or early next year, pending regulatory clearance. Chime is going public too—that’s another great one. The retail market is hungry.
Why do you think retail investors are so hungry?
Because of the excess supply of capital. There’s money just sitting on the sidelines. Depending on which pundit you listen to, there’s anywhere from $1 trillion to $10 trillion sitting idle.
Globally? Or in the United States?
The $10 trillion figure came from the chief economist at T. Rowe Price. She was on CNBC recently saying, “We’re hungry for IPOs.” Take Circle: it was initially priced between $18 to $22. It got priced at $39, opened at $69, and now it’s touching $120. Same thing with CoreWeave. It IPO’d at $40 just two weeks ago. Today? It’s at $160. CoreWeave is valued at around $50 billion now. Circle’s about $25 billion.
What are some of the emerging venture capital trends from your perspective?
Everything is AI. But I’m honestly sick and tired of AI. Everyone’s an expert in AI these days, at least anyone who can spell it. Trends are simple: You’ve got platform plays and product plays. AI is a platform. Then there are vertical applications:consumer-facing, industry-specific, whatever. If you believe what people like Satya Nadella are saying, in his recent interview with Mark Zuckerberg, 30% of Microsoft’s codebase is now AI-generated. What does that mean? That he didn’t need to hire 30% of those engineers.
So now the big question is: What do we teach the next generation? What skills do they need? At UC Merced, where I’m on the board, we talk about this all the time. The data — fact-check me on this — is that something like 80% of the jobs in 2040 don’t yet exist. And with AI, maybe it’s more like 99%. So no one really knows what tomorrow’s workforce will look like.
Then you’ve got Sam Altman saying, “Don’t be surprised if there’s a multibillion-dollar company run by just three people.” That’s scary. Where will everyone else go? I don’t have a clear answer. But what I do remember from business school — Econ 101 — is that it takes a shock to change behavior. Microsoft’s investment in OpenAI. That triggered everything else in AI.
Do you remember what was hot before AI?
Blockchain…
Exactly: blockchain and crypto. People were buying virtual homes next to Snoop Dogg in the Sandbox metaverse. Now? No one’s talking about that. But crypto came roaring back. The trigger? Trump coming back into the picture. Boom! Bitcoin surged from $60K to $110K or whatever it is today. Whatever happens, because of tech’s crazy multiples, you’ll always see volatility.
Looking ahead, people are betting big on “frontier technology.” That includes space, defense, healthcare. What is frontier tech? It’s basically tech that’s so new, we don’t even know what to expect. But we do know this: a lot of investment is going to flow into it.
So there are new areas — new spaces — where people are figuring out how money can be made, where inefficiencies exist, and where technology can bring in efficiencies.