Incredibly, when you think about it, US-based venture capital has remained structurally unchanged for half a century. The well known model revolves around the 10-year fund lifecycle, the 2-and-20 fee structure, and the relentless push for growth and outsized returns. Decisions are made in mysterious ways and are known to be full of bias against founders who don’t fit a certain mold. But even as rivers of investment flow into anything touching AI, there may yet be an ironic twist to come.
Venture investing involves optionality and power laws. Very few investments will generate any returns at all, but the sector is premised on the idea that within any portfolio there will be just a few startups that will enjoy a spectacular exit, through an initial public offering or by being acquired by a deep-pocketed established firm. VC’s are betting on their ability to sniff out the rare winners amid a sea of potential startups. But in many ways, it’s a terrible business—by some accounts 95% of the industry’s total returns are generated by less than 5% of its firms. Nonetheless, venture capital is firmly planted in the economy and in the public consciousness as the way that innovations get funded and businesses grow.
For many entrepreneurs taking venture capital money is seen as a badge of honor and a financial boost for quick growth. Nonetheless, there are any number of complaints that founders have with regard to their investors, ranging from misguided expectations to unwanted advice to egregiously unfair business practices with respect to the equity and control that the firms extract. So why turn to a venture capitalist? Mainly because there were issues that no founder could address on their own or with capital that was ready to hand.
The logic of venture capital was always premised on scarcity. Capital was scarce. Technical talent was scarce. The infrastructure to build, test, and distribute a technology product was scarce. VCs existed to bridge those gaps—to provide the resources a promising team needed before the market could prove them right. In exchange, they took equity, board seats, and influence over strategy. It was a reasonable bargain, forged in the conditions of the 1970s and refined through the personal computer, internet, and mobile revolutions.
AI is dismantling every one of those scarcity.
The collapsing cost of creation
Consider what it actually costs to start a technology company today. A founder who five years ago needed $2 million and eighteen months to build a minimum viable product can now do it alone in six weeks for the cost of a few cloud subscriptions. Tools like Cursor, Lovable, and Replit, powered by large language models, have compressed the software development cycle so dramatically that technical co-founders—long considered mandatory—are increasingly optional. One solo founder, Maor Shlomo, built an AI startup called Base44 entirely alone, reached 300,000 users and $3.5 million in annual recurring revenue, and sold it to Wix for $80 million in cash—in six months.
That is not an outlier story. It is an emerging template. Indeed, 80% of companies that go public do so without venture funding. More than half of successful startup exits last year were achieved by solo founders. The minimum viable team for building a significant technology business has dropped to one.
