AI creates challenges that are specifically bad for VCs

September 10, 2025

Here's why I think VCs, as a species, are in serious trouble right now.

1. The primary reason VCs were needed was that it was usually impossible to start a company and build a product without lots of up-front capital. Now that's not the case. And the easier that gets, the less VCs are needed.

2. The whole ecosystem was based on scarcity. There were very few founders. Very few ideas. Very few companies. Again, this is no longer the case.

3. It's extremely hard to pick winners when there are 100x more companies to evaluate.

4. The founders for the most exciting companies aren't likely to take a call. There's a very tiny moment where 1) such a company would need to scale with VC money, and 2) that someone else hasn't already taken advantage of.

5. A lot of VCs are still spending time managing multiple legacy companies that are flailing right now. And many of those companies will go out of business in the next 5 years.

6. The competition against whoever you back is now 10-100x stronger, so your bets are even less guaranteed.

So:

• VCs will still be needed. But they used to be needed by the vast majority of companies, and now it'll be the minority.

• Finding the small percentage who need you is harder.

• And even if you find someone...they'll need less help, giving you a lower return, and they will be facing even stronger competition.

Still possible to get victories, but the space isn't looking great in my opinion.