Business journalist Insider Ben Bergman announced this week that Mira Murati collects around $ 2 billion for his AI Startup, Thinking Machines Lab.
This company is only a few months old and just employs a handful of people. There are no products yet. So why would investors earn as much money and appreciate such a business at around $ 10 billion?
I think there are two main explanations. Both are based on the functioning of venture capital in the era of generative AI and great technology.
The Power Act
First of all: this is a very expensive option on Mira’s startup that works dramatically. If this happens, an evaluation of $ 10 billion could become $ 100 billion. Or 1 dollars billion. Openai, where Murati worked, was recently estimated at $ 300 billion. Google is worth nearly 2 billions of dollars.
If Thinking Machines LAB is transformed into success like these two companies, your venture capital fund is carried out for the decade. You have made 10x or 100x your investment, so the rest of your early startups portfolio does not really matter. These companies can all fail and you have always generated impressive yields.
This is known as the “law of power”, which stipulates that venture capital funds cannot succeed without at least one bet so extraordinary that its gains refer the full value of the fund to investors. A potential example that comes to mind is the first participation of Accel Partners in Facebook.
“Each year brings a handful of aberrant values that struck the Grand Slam Proverbial,” wrote Sebastian Mallaby in his book in 2022 on the subject. “The only thing that counts in Venture is to have a piece of them.”
The “Grand Techt”
However, most startups do not work. If the thinking machines are not doing well, there is another path where investors can still earn money – even if they have put what seems to be a ridiculously high assessment on this startup.
Sometimes startups that find it difficult to sell products and generate income still have other precious assets. Maybe they have invented a new technological thing and have patents to save it. Or they use talented technicians. Or both. (Certainly, Murati is incredibly talented and she hired a lot of experts from her open days).
In situations like this, large technological companies sometimes move and acquire these startups. When these transactions are mainly intended for talents, these transactions are called ack.
In the era of the generator, when technological companies are run for domination, some of these transactions have been enormous.
Last year, Google agreed to pay $ 2.5 billion to obtain a license CharacterTechnology and hiring the two STARUP superstar co -founders, as well as 20% of other employees.
Microsoft has concluded an agreement similar to the inflection, a startup managed by the co -founder Deepmind Mustafa Suleyman. Amazon made a similar with Adeppt.
These types of transactions do not generate 10x or 100x yields for VCs. But they can bring them out of investments in difficulty in difficulty with little financial damage or sometimes even a relatively healthy gain.
For example, the character. AA enabled investors a yield of around 2.5x, Ben Bergman de Bi wrote last year.
Let us call it the “Big Tech Put”.
A sale option is a financial contract which gives the owner the right to sell an asset at a specific price on a specific date.
More generally, a put is the idea that if the price of something falls a lot, someone important will intervene and support it. Or even more generally, it is the idea that if the sh * t strikes the fan, higher powers will intervene to clean the mess.
There is a “Fed power”, which is the belief of investors that the federal reserve will intervene on the markets if prices fall to a certain level.
And now there is even a “put trump”. This is the conviction that US President Donald Trump will do what it takes to support the market. This theory recently went around when he did a global tariff break after the bond market went crazy for a day or 2.
If wider markets can have theories of “putting”, then why can’t the venture capital have their own “Big Tech Put”?
By the way, I just looked for this sentence on Google, and I found no one to use it. So I claim it like mine. I came with that, ok?
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