I have a riddle for you: Put four VCs on a stage in a chandeliered ballroom in 2024. What are they most likely to talk about?
I know, it’s a silly riddle, because the answer is aggressively obvious: AI. But there’s a wrinkle here. This particular chandeliered ballroom in San Francisco’s Palace Hotel on Tuesday was hosting the 2024 Goldman Sachs Communacopia and Technology Conference.
Though VCs are in the business of backing upstarts, at a Goldman conference it’s inevitable that incumbents will loom large. (After all, what’s more incumbent-y than Goldman and its equity research team’s coverage of publicly traded companies?) And one message I got loud and clear was that incumbents are especially well-positioned in this technological shift—perhaps more so than they have been in previous transitions.
"In cloud wave one, there was a real disadvantage for the incumbents," said Byron Deeter, partner at Bessemer Venture Partners. "Here you’ve got real data distribution advantages that the smart players have, and that’s a real challenge to us funding new companies that are coming into the market now. They’ve got all the other traditional advantages of speed, focus, and reasonably low-cost capital given high valuations—but some of those incumbents will harness those advantages, too."
Sure, the standard bearer for generative AI may be OpenAI, a startup that VCs can’t get enough of. But it’s no accident that the AI boom has been marked by alliances between startups and the big incumbents, whether it’s Microsoft and OpenAI, or Amazon, Google, and Anthropic.
The dynamic between incumbents and startups was a recurring theme during the 40-minute panel.
"I still think that there's a lot of opportunities, in white space between the big boulders for startups, and that's what's making life for all of them really exciting right now," said Glenn Solomon, Notable Capital managing partner. "One area that comes to mind for me is the productivity that can be driven from code generation as an example. It’s the first really good area where you’re seeing knowledge work change...There’s a lot of data to refine and it’s obviously a big part of the economy. And, of course, Microsoft has a big role to play there."
Knowledge work came up repeatedly.
"For me, to rethink HR applications or CRM is really a massive disruption," said Guru Chahal, partner at Lightspeed Venture Partners. "That’s a guaranteed massive disruption that’s exciting and covers a trillion dollars of spend on workforce and knowledge work that’s simply not touchable."
"That's the real opportunity—to reimagine these workflows," said Asheem Chandna, Greylock partner. "In some cases, it's going to be a copilot for augmentation and…I think that’s going back to the incumbents, but the real opportunity is if you can just rethink the whole piece."
This isn’t to say that incumbents will have it all figured out—the transition is going to be "clunky," said Deeter, and it’s hard to not to believe him as we continue to watch incumbents and startups alike try to find the AI business model of best fit.
Everyone I talk to has a different take on where we are in the AI cycle and the possibility of an AI bubble burst. But I think there’s perhaps one thing we can agree on—that we’re not going to stop talking about it anytime soon.
Debate time…Last night, Kamala Harris and Donald Trump met for a debate. On X, most VCs and tech founders reacted in a predictable partisan fashion, but it appears some minds may have been swayed. Mark Pincus, former Zynga CEO, previously has spoken in support of Trump, but in responding to Lux Capital cofounder Josh Wolfe’s laudatory tweet regarding Harris’ performance, he suggested that he’d been impressed with Harris. Silicon Valley’s intensely partisan discourse continues, and the memes were instantaneous.
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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