![](https://content.fortune.com/wp-content/uploads/2023/12/GettyImages-615655718-e1703441372651.jpg?w=840)
Billionaire investor Chamath Palihapitiya. David Paul Morris/Bloomberg via Getty Images
Artificial intelligence was inevitable this year. After OpenAI launched ChatGPT about 13 months ago, attention turned to how such tools would disrupt careers and industries — and eager venture capitalists pumped billions into potentially disruptive AI startups.
But VCs themselves may be disrupted, according to billionaire investor Chamath Palihapitiya, a former Facebook executive and CEO of VC firm Social Capital.
“We talk about AI as a big disruption to big companies and this and that, but AI may be the biggest VC disruptor in the end,” Palihapitiya he said in the All-In Podcast this week.
A “world where AI proliferates,” he said, is “positive for founders,” who will be able to own more of their companies instead of giving too much equity to VCs.
In the past, he said, a tech startup with $2 million in funding might hire seven people and have enough capital to survive for a year and a half, after which it would hopefully have gained enough traction for investors to kick in $10 or $15 million in funding. series A funding. The downside, of course, is that in exchange for capital, VCs want equity in the company.
But AI tools give founders more leverage, Palihapitiya said, citing GitHub Copilot, which makes building and debugging code much easier. Startups can now hire developers, perhaps in other countries with lower pay rates, to use such tools to get more done faster, he noted.
The result is that, today, a tech startup with the same amount of seed funding can have a team of three or four people and survive on that $2 million for four years instead of a year and a half. The founders could then end up owning 80 percent of their company with the option to exit for $50 million or $100 million, “and they’ve made more money than they would in a traditional outcome,” he said.
“It’s only a matter of time,” added Palihapitiya, “until they can put two and two together in an Excel spreadsheet to realize that owning 50% of a $100 million company is greater than owning 18% of some other company when massively diluted again, or 8% or whatever.”
Jason Calacanis, an angel investor, responded that now, instead of founders in a particular cohort competing to see who can raise the most money at the highest valuation, he’s seen them shift to, “how do I get to profitability and how do I own as much of my party as possible?’
Palihapitiya became the face of the SPAC boom and bust a few years ago because of his involvement with buyout companies — publicly traded shell companies that buy out a private company, taking it public without the rigors of the IPO process.
This is not the first time he has considered the role of VCs in a world altered by artificial intelligence.
“It seems pretty logical and reasonable,” he said last month on the podcast, that AI productivity gains will lead to tens or hundreds of millions of startups made up of just one or two people.
“There are many kinds of financial engineering that are disappearing in this world,” he said. “I think the business of venture capital is changing very profoundly. I think there’s a reasonable case that there isn’t.”