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The AI boom is only just beginning — and it may prove the most lucrative cycle in venture-capital history, even as it also leaves behind a wave of startups.That's according to Mel Williams, cofounder and partner at TrueBridge Capital Partners, a fund-of-funds manager with $8 billion under management that has backed firms such as Founders Fund, Thrive, and Sequoia.
While VCs pick startups, Williams' job is to pick the VCs — giving him a rare, ecosystem-wide view of what's coming.His outlook: AI will create enormous value over the next decade, but a number of startups won't make it out alive."We think we're at the leading stages of an AI wave," Williams said during an interview on Jack Altman's "Uncapped" podcast released on Tuesday."We're going to see a lot of carnage over the next 10 years. And we will see more value created over the next 10 years than we've seen in the venture industry," he said.Williams described the early-stage AI environment as overheated.Founders with the right résumés — often with experience at OpenAI or top labs — can raise massive rounds at lofty valuations with little proof their product works."At the earlier stages of the formation stages, where there's less evidence of a product market fit, you do see founders with credibility, founders who could check a couple boxes raising large pools of capital at very high valuations," he said.Growth-stage deals, he added, look more reasonable, with valuations closer to public-market levels as investors focus more on real revenue.Williams believes AI is accelerating the power-law pattern that already defines venture capital: a tiny handful of companies drive nearly all the returns."The magnitude of the winners is even greater today than it has been in prior cycles," he said. It "is going to be outsized in this market."He pointed to three forces intensifying that trend:The result: companies that get product-market fit could become market leaders quickly, while those that miss may stumble. Williams said the frenzy is largely confined to the field of AI. Outside of this, valuations remain reasonable, and capital still moves around milestones and revenue, he said.The broader venture market, in his view, looks attractive compared to the overheated AI landscape.But AI now accounts for 50% to 60% of all venture activity, he said — and that imbalance is setting the stage for a harsh correction.Even if non-AI categories stay rational, Williams believes the sheer amount of capital flooding into AI will create a long trail of "carnage" as companies miss product-market fit or fail to justify their sky-high valuations."We're in the early stages of that. There's evidence that it's working," he said, but he added, "at the same time, it feels like a very frothy investment environment."
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