4 ms·

Do folks think that this was utter negligence by the VCs, or just a pump and dump?

by mountainriver 1y ago

fakedang 1y ago
Not just VCs. Microsoft was an investor too.
- pyman 1y ago
  Microsoft invested £250M in Inflection AI, £250M in Builder.ai, and has backed several other companies working on LLMs. They’ve been placing strategic bets across the AI space, but only a few of those companies actually had the talent, infrastructure, and funding needed to build real models. The VP of AI was Craig Saunders, the same person who helped create Amazon Alexa. The problem is, they ran out of money. $500 million sounds like a lot, but it's not even close to what you need to build and train a real LLM. You need billions. Most people just don't realise that. See: https://www.businesswire.com/news/home/20240611122778/en/Builder.ai-Strengthens-Leadership-with-Craig-Saunders-from-Amazon-as-New-Vice-President-of-Artificial-Intelligence https://www.businesswire.com/news/home/20240611122778/en/Bui...
  - seanp2k2 1y ago
    ...and given the massive success of Amazon Alexa...
    - deleted 1y ago
      [deleted]
alephnerd 1y ago
For every investor in Builder, there were multiple that passed. Notice how (aside from MS) most participants were not experienced Enterprise SaaS or AI/ML investors.
s1artibartfast 1y ago
neither? Negligence doesn't make sense because it was the VCs own money- no duty to care. It doesn't seem like anyone cashed out either. Seems like a bad bet that went south.
- sib 1y ago
  >> Negligence doesn't make sense because it was the VCs own money Almost definitionally, VCs are investing someone else's money (the people providing the capital are called the "limited partners" (LPs); the VCs who raise and invest the money are "general partners" (GPs).) The LPs are often pension funds, university endowments, and charitable organizations. Yes, GPs do typically have a capital contribution requirement, but it's generally in the area of 1% of the fund, so the vast majority of what VCs are investing is other people's money, for which they definitely have fiduciary responsibility.
  - s1artibartfast 1y ago
    That's fair.
petesergeant 1y ago
I dunno, there's a world where this ends differently, and the company was liquid for six more months and transitioned to "actual" AI instead, having already built the customer base and sales channels, and everyone's happy. Launching your AI product before the AI works appears not to be especially unusual and is only a problem if the money runs out before you finish building the AI.
flowerthoughts 1y ago
There's a more-or-less useful adage in investing: scared money don't make money. Startups will always carry a risk, and VCs are not betting that the company will be asymptotically good, just good enough to make an exit.
- compiler-guy 1y ago
  And even more than that, just that some company they invest in will be a winner. It's OK for most to fail, as long as one of them does well. So they invest in lots of long-shots.
- MegaButts 1y ago
  > VCs are not betting that the company will be asymptotically good, just good enough to make an exit. This is a misunderstanding of VC investment. Any competent VC expects most of their investments to go to zero. They're hoping a small percent of their investments will make up for the losses. The goal of a decent VC isn't to avoid bad investments so much as it is to make sure they get one good investment. A good investment in AirBnB/Google/Facebook will make up for dozens of speculative bets that go to zero.
  - flowerthoughts 1y ago
    > This is a misunderstanding of VC investment. Any competent VC expects most of their investments to go to zero. I'll be doing a linguistic nit pick now, as I felt it was a bit harsh to label my statement as a misunderstanding. The bet is still on each investment to have a good exit. With the implied assumption that betting is a probabilistic game.
    - MegaButts 1y ago
      No, this is wrong. VCs regularly bet on companies they expect to fail, and occassionally even know will fail. They sometimes put money into companies knowing they will never get it back. They do not expect a positive return on every investment.

Do folks think that this was utter negligence by the VCs, or just a pump and dump?

fakedang 1y ago

Not just VCs. Microsoft was an investor too.

pyman 1y ago
Microsoft invested £250M in Inflection AI, £250M in Builder.ai, and has backed several other companies working on LLMs. They’ve been placing strategic bets across the AI space, but only a few of those companies actually had the talent, infrastructure, and funding needed to build real models. The VP of AI was Craig Saunders, the same person who helped create Amazon Alexa. The problem is, they ran out of money. $500 million sounds like a lot, but it's not even close to what you need to build and train a real LLM. You need billions. Most people just don't realise that. See: https://www.businesswire.com/news/home/20240611122778/en/Builder.ai-Strengthens-Leadership-with-Craig-Saunders-from-Amazon-as-New-Vice-President-of-Artificial-Intelligence https://www.businesswire.com/news/home/20240611122778/en/Bui...
- seanp2k2 1y ago
  ...and given the massive success of Amazon Alexa...
  - deleted 1y ago
    [deleted]

alephnerd 1y ago

For every investor in Builder, there were multiple that passed. Notice how (aside from MS) most participants were not experienced Enterprise SaaS or AI/ML investors.

s1artibartfast 1y ago

neither? Negligence doesn't make sense because it was the VCs own money- no duty to care. It doesn't seem like anyone cashed out either. Seems like a bad bet that went south.

sib 1y ago
>> Negligence doesn't make sense because it was the VCs own money Almost definitionally, VCs are investing someone else's money (the people providing the capital are called the "limited partners" (LPs); the VCs who raise and invest the money are "general partners" (GPs).) The LPs are often pension funds, university endowments, and charitable organizations. Yes, GPs do typically have a capital contribution requirement, but it's generally in the area of 1% of the fund, so the vast majority of what VCs are investing is other people's money, for which they definitely have fiduciary responsibility.
- s1artibartfast 1y ago
  That's fair.

petesergeant 1y ago

I dunno, there's a world where this ends differently, and the company was liquid for six more months and transitioned to "actual" AI instead, having already built the customer base and sales channels, and everyone's happy. Launching your AI product before the AI works appears not to be especially unusual and is only a problem if the money runs out before you finish building the AI.

flowerthoughts 1y ago

There's a more-or-less useful adage in investing: scared money don't make money. Startups will always carry a risk, and VCs are not betting that the company will be asymptotically good, just good enough to make an exit.

compiler-guy 1y ago
And even more than that, just that some company they invest in will be a winner. It's OK for most to fail, as long as one of them does well. So they invest in lots of long-shots.
MegaButts 1y ago
> VCs are not betting that the company will be asymptotically good, just good enough to make an exit. This is a misunderstanding of VC investment. Any competent VC expects most of their investments to go to zero. They're hoping a small percent of their investments will make up for the losses. The goal of a decent VC isn't to avoid bad investments so much as it is to make sure they get one good investment. A good investment in AirBnB/Google/Facebook will make up for dozens of speculative bets that go to zero.
- flowerthoughts 1y ago
  > This is a misunderstanding of VC investment. Any competent VC expects most of their investments to go to zero. I'll be doing a linguistic nit pick now, as I felt it was a bit harsh to label my statement as a misunderstanding. The bet is still on each investment to have a good exit. With the implied assumption that betting is a probabilistic game.
  - MegaButts 1y ago
    No, this is wrong. VCs regularly bet on companies they expect to fail, and occassionally even know will fail. They sometimes put money into companies knowing they will never get it back. They do not expect a positive return on every investment.