Portfolio review takes on a new urgency for VCs as AI makes 2024’s great deals look like 2026’s clear mistakes

Venture capitalists are facing a new urgency in their portfolio reviews as AI technology accelerates the obsolescence of deals that were once considered successful. According to Eric Archer, co-founder of Monashees, "AI is changing really fast, and it's changing the half-life of a thesis." Kamran Ansari, founder and managing partner at Kapital Ventures, notes that businesses with proprietary data and regulated license businesses are the only ones with some level of insulation from the rapid changes brought on by AI.

In this environment, portfolio reviews are more nuanced, as they need to consider what track the startup is on and what that means for its future, rather than just whether it's performing or not. The four main categories of startups right now include soaring AI consensus bets, efficient-growth companies, companies with paths to product-market-fit in tough industries, and startups caught in the crosshairs of OpenAI and Anthropic.

As AI continues to evolve, even successful startups from just a few months ago may no longer be valuable. For example, Perplexity, once a hot company, is now struggling due to Google's fast catch-up with AI-powered search. The challenge for founders is to determine what is valuable about their startup and how to recoup value. Investors are also reevaluating their portfolios, with about 10-20% of their investments feeling vulnerable due to the rapid pace of AI changes. Some are even suggesting founders return a portion of their invested capital to mitigate the risk.