Venture capitalists are questioning the neolab math
VCs are divided over whether neolabs can justify multibillion-dollar valuations. Plus, inside Menlo Ventures' 50th-anniversary party.
According to multiple venture capitalists at top firms in Silicon Valley, there is a growing debate about whether "neolabs" – lavishly funded, research-first AI startups – can make the economics work with their multibillion-dollar valuations and strong competition from leading AI labs. Notable neolabs include Jeff Dean's new AI science startup valued at up to $50 billion, OpenAI co-founder Ilya Sutskever's Safe Superintelligence at $32 billion, and Mira Murati's Thinking Machines Lab at around $40 billion.
VCs are divided on whether neolabs are too expensive to invest in, with some arguing that software is dead and only owning models or hardware will be valuable. Others believe that investing in neolabs is the only worthwhile strategy, given the potential for massive returns and the fact that software talent continues to migrate from established companies and academia into startup roles.
Some VCs believe that the majority of neolabs will fail, but the rare winners could become foundational AI companies worth hundreds of billions or more. Partners at Menlo Ventures, such as Matt Murphy and Deedy Das, have expressed concerns about the challenging math behind making neolab investments profitable.
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