Real AI, Real Stakes, and the End of Old Playbooks

Will Venture Capitalists Adapt? The Fourth Industrial Revolution.

Aug 19, 2025

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Don’t be fooled by the headlines. The AI boom hasn’t peaked.

This week, we examine the impact of the Fourth Industrial Revolution on venture capital. Will AI replace VCs? Or will the best VCs adapt and thrive alongside it?

Let’s dive in.

AI is not coming for your job as a VC—unless you refuse to evolve. That's the hard truth, and if you haven't felt the tremors, you're not paying attention.

In 2025, VC looks nothing like it did just a few years back. The funding numbers, team structures, and core technologies are unrecognizable. The message is clear: adapt or become obsolete.

What Changed—And Why the Last 6 Months Rewrite Everything

The numbers say it all.
OpenAI’s $40B raise in March 2025—at a $300B valuation—eclipsed most global R&D budgets (article).crescendo
Anthropic raced to $170B on its recent $5B round; Mistral hit $10B for open-source Models; Perplexity AI snagged $500M at $4B, aiming for IPO.
Agentic, multimodal, and SLM-first startups—like Glean ($150M at $7.2B), Cursor ($2B, 95% code written by AI), and Thinking Machines Lab ($2B)—now go from stealth to unicorn at record speed.

Recent deal links & further reading:

The Tech Stack That’s Changing Everything

World Models: Beyond Language Processing

World Models are no longer just about words: they understand images, video, audio, and market structure—and investors are pouring capital in. World Labs' $230M raise brings 3D generation and simulation AI to mainstream use, giving VCs new tools to simulate founder risk and portfolio scenarios automatically. crescendo

Why this matters:
VC due diligence is now about market simulation, not just spreadsheet analysis.

Small Language Models (SLMs): The Efficiency Game Changer

Phi-3 Mini, Llama 3.1, and their kin have changed everything.
SLMs are “arms dealers for capital efficiency”. Small, private, edge-ready—they allow cost-efficient, data-secure AI use in finance, enterprise, and health.
For VCs?
Capital-light unicorns are real—startups now expense less, scale faster, and keep teams smaller.

Vibe Coding: The New Democratization

Vibe coding’s what everyone’s talking about.
You prompt, the agent codes. Star YC batch companies report 95%+ AI-generated code. Cursor, Replit, Ghostwriter, and many newcomers are lowering the bar, letting anyone go from prompt to production in days.
VCs, take note:

Lean teams, big exits: $10M+ ARR with under 10 employees
Coding skill is less relevant; “AI-native” mindset is everything
VC value shifts from check-writing to strategic guidance and deep networks
Vibe Coding trends
TechDogs

The Numbers Don’t Lie: VC Flows and Market Reality

Capital concentration hits historic levels:

$49.2B GenAI VC in H1 2025—outpacing all of 2024ey
Median late-stage deals now $1.55B (vs $481M last year)bain+1
US: Up to 70% of VC funding = AI startups in Q2

What does this mean for startups?

Faster product cycles (55% faster to market)
More founder leverage—capital-light unicorns can say “no thanks” to traditional VC
Smaller teams, faster exits
EY: $49.2B GenAI 2025
Ropes & Gray global VC/AI

The Adaptation Imperative: Evolve or Become Legacy

Where Human Edge Still Matters

Even in an AI-dominated landscape, human edge is critical for pattern-breaking, outlier-picking, and relationship building. Your advantage?
Interpreting the noise, not just seeing the signal.
Deal flow is AI-fueled, but insight is human. Diligence is AI-augmented, but intuition and trust remain pure human assets.

Skills for a New Era

AI literacy is table stakes—if you can’t speak “vibe coding” you lose founder cred.
Build strong, ethical, explainable AI frameworks—regulators and founders want transparency.
Mentor, don’t just manage—distinctly human guidance is now your greatest added value.

Concrete Strategy: For GPs, LPs & Founders

VC Firms: Integrate AI end-to-end, upskill teams, invest in data infrastructure, and set explainable AI standards.
Founders: Be data-ready for diligence, pitch AI-native velocity, and know your new leverage.
LPs: Probe for AI depth, not just surface talk—ask about model governance, ROI, real use.
Everyone: Focus on vertical—domain-specific AI trumps generic models for moat-building.

Takeaways & Forward Look

The biggest risk isn’t being replaced by AI—it’s being outpaced by founders/teams using it smarter and faster than you.
The VC of the future? A hybrid. AI as copilots for data; human insight for conviction and mentorship.

Recent references for further exploration:

The journey towards truly open, responsible AI is ongoing. We will realize AI's full potential to benefit society through informed decision-making and collaborative efforts. As we explore and invest in this exciting field, let’s remain committed to fostering an AI ecosystem that is innovative, ethical, accessible to all, and informed.

If you have questions, you can contact me via the chat in Substack.

Note: Portions of this article draw on insights from my previous post. As I’m currently deeply engaged in an intensive diligence process, stay tuned—next week I’ll share a fresh perspective and some exciting news you won’t want to miss.