Everyday AI Podcast – An AI and ChatGPT Podcast - EP 128: AI in VC - Changing the Investment Landscape

Episode Date: October 23, 2023

With AI currently running the US economy, how will it affect venture capitals? Are VCs only going to be investing in AI? Should you add AI to your startup? Leon Eisen, PhD, Venture Partner of Network.VC, joins us to talk about the future of AI in the investment landscape.Newsletter: Sign up for our free daily newsletterMore on this Episode: Episode PageJoin the discussion: Ask Leon and Jordan questions about AI and VCsUpcoming Episodes: Check out the upcoming Everyday AI Livestream lineupWebsite: YourEverydayAI.comEmail The Show: [e-mail] with Jordan on LinkedInTimestamps:[00:01:25] Daily AI news[00:03:50] About Leon and his background[00:08:05] Will AI help or hurt us?[00:12:20] AI's impact on startups [00:18:30] What AI tools are VCs using?[00:21:10] Advice for startups[00:25:57] How AI is changing venture capitalistsTopics Covered in This Episode:1. Impact of AI on the venture capital landscape2. Impact of generative AI tools on startup founders3. AI integration in startup operations and processesKeywords:artificial intelligence, venture capital landscape, AI-related companies, startups, podcast, newsletter, UK AI summit, competitiveness, Apple, iPhone, Google Pixel, hardware, software, iOS 18, General AI, generative AI, startup founders, decision-making process, pitches, AI governance, Chinese officials, ChatGPT, lean development teams, customer success, optimizing spending, quantum field, machines surpassing humanity, unconsciousness, investing in AISend Everyday AI and Jordan a text message. (We can't reply back unless you leave contact info) Start Here ▶️Not sure where to start when it comes to AI? Start with our Start Here Series. You can listen to the first drop -- Episode 691 -- or get free access to our Inner Cricle community and all episodes: StartHereSeries.com Also, here's a link to the entire series on a Spotify playlist. 

This is the Everyday AI Show, the everyday podcast where we simplify AI and bring its power to your fingertips. Listen daily for practical advice to boost your career, business, and everyday life. Meet Firefly AI Assistant, now live and Adobe Firefly, the all-in-one creative AI studio. Just describe what you want to create and the assistant handles the rest, orchestrating multi-step workflows across Photoshop, Premiere Express, and more in one conversational interface. You direct the outcome. The assistant accelerates execution. How is artificial intelligence going to change the venture capital landscape?

Are only, you know, our VC is only going to be investing in everything AI. Should you be throwing artificial intelligence into your company if you're a startup founder, entrepreneur? I don't know. I don't have all of the answers to these questions, but I have a very special guest today that can help us figure that out. welcome. This is Everyday AI. This is your daily live stream podcast and free daily newsletter helping everyday people like you and me, not just understand what's going on in the world of AI, but how we can actually use it. So if you are interested in the ever-changing startup landscape, you know, and specifically even how artificial intelligence is really helping to form

and shape the future of startups, today's episode is for you. So if you are joining us live, Thank you. Make sure to get your questions in now. You know, what do you want to know about this changing landscape in venture capital and artificial intelligence and startups? So before we get to that, let's first talk about what's going on in the world of AI news. So first, Britain's AI summit is reportedly not off to a great start. So the UK government, we talked about this last week on the show, is organizing a global summit on AI governance with a focus on potential AI. driven problems. So this narrow focus, however, has excluded some important voices from UK's own AI industry

and has raised some concerns about the inclusion of Chinese officials. So this limited agenda for the summit has already drawn criticism for ignoring more real, immediate kind of just real world risk of AI in hindering the UK's ability to compete in the industry. So already a lot of criticism toward this Britain's AI summit that, was supposed to bring everyone together, and now it's already starting to draw a little bit of controversy. All right, next, a lot of Apple news over the weekend, y'all. So we're going to get to the two biggest ones. So first, new report has said that Apple's, some Apple insiders are leaking

the company's AI plan for the next iPhone. So AI, or sorry, Apple, rather, may be playing catch up to some of its rivals. So Google's Pixel 8 and Pixel 8 pro that were recently released are AI first smartphones with AI integrated both into the hardware and software. And this has kind of left Apple scrambling a little bit to catch up in the AI race. And they are planning to test some new AI capabilities in the coming months before potentially releasing some of these AI software features in iOS 18. That's not the only Apple news. We'll cap it off with some more Apple news.

So some new reports say Apple has a, quote, lot of anxiety about the Gen AI moment. So Apple was officially, initially caught off guard by sudden focus on AI in the tech industry, and now they're kind of working to catch up. So the companies, get this, y'all, the company's AI team, according to recent reports, has allegedly a budget of $1 billion to be working on generative AI. So Apple is exploring different ways to integrate generative AI into various applications, from development tools to customer service tools, as well as implementing AI to improve user experience.

I don't know about y'all, but like a billion dollar budget, like that's wild, right? All right, but let's get back to why you joined us today. You probably are here to hear and to talk about artificial intelligence in the VC world and kind of the ever-changing landscape. So with that, please help me welcome to the show. There we go. we have Leon Eisen, an inventor, serial entrepreneur, adventure partner of NetworkBC.

Leon, thank you so much for joining the Everyday AI show. Hi, Jordan. Thank you very much for inviting me. I am happy to be here. I follow your everyday AI almost every day. And I like a lot of my friends who are there. So thank you for inviting me. No, absolutely.

Hey, speaking of friends, we have some of our everyday AI regulars joining us. on the show. So Brian saying, good morning. Dr. Harvey saying he's catching it from Texas. Hi, hi. We have the usual crew. So, hey, if you have any questions for Leon, just about AI in the venture capital industry and how it's changing, please get those questions in now. So Leon, maybe let's start at the top. Can you tell everyone a little bit about kind of what you do? Because that's a lot, inventor, serial entrepreneur, venture partner. What is it that you do with network DC. Yeah, but I would like to start from the beginning, I would say.

So I have PhD in physics and did my post-doctoral research in quantum computers, specifically laser cooling. And this has created some basis where I am today. So I was working like, then I left science, spent for a long time and became engineer and then moved to entrepreneur, entrepreneurial area, and In 2009, in the middle of crisis, I succeeded to raise the first million dollar. People laughed on me. So I was almost in a level of bankruptcy, but it was very difficult as I burned my boats.

And finally succeeded and invented the world first of the day clear at false axiometry monitor at risk. Long before everybody else just got into this market. Today people use my device like predicate and successful in the market. And for 10 years, I was managing Oxytone Medical, like CEO. I was founder of this company and get this company to somehow success. And so I learned a lot through my experience for a long time. And somehow all all plans. is aligned in one. I think I should get into investment area because I didn't touch it yet.

And I all the time I was sitting in front of investors and I learned how they think. And then I get into their play into their cheer just sitting in there on their chair. Now I understand how wrong I was then I raised a lot of millions, but actually, all the time today I understand how I was wrong with my approach to how investor really think. And now I understand this. And now I teach a lot of startups. I'm not only investing. I'm teaching.

I'm mentor of founder of founder of many accelerators. And really the main problems are entrepreneurs, entrepreneurs. they're not ready to raise money. I didn't see any entrepreneur ready to raise money. 99% of entrepreneurs cannot give you elevator pitch for photos even 60 seconds. And somehow they rise. They rise. And this is very interesting stuff.

So, you know, Leon, you obviously have an impressive in a background from all different angles, you know, in, you know, venture capital. you know, entrepreneurship and even the kind of being an inventor yourself. But let's just first kind of get a general understanding. So when we're talking about AI, I'd love to get your kind of vantage point of this, you know, because you do have a background that's more seasoned than most and more well-rounded than a lot of, you know, people that we talk to. But, you know, when we talk about a general understanding of artificial intelligence, you know, what are your thoughts on that, you know?

And do you think it's something that's going to eventually bring us together? Or could AI be something that could kind of fracture us and also with different startups in the industry as well? Yeah, very interesting question. Thank you very much. So as of all, we have to understand what is it AI. I know it's interesting to tell you, AI, everyday AI, to talk about what is it AI? But I want to share my understanding. So as you know, IBM 50 years ago defined AI.

like software that mimics decision making and the problem solving by the human mind. I consider AI like some kind of mirror of the human mind. Mero. So we how we understand ourselves because we are like a word of humanity, a totally unconscious. And how to bring. us to consciousness. That's why we have wars. That's why we have injustice. That's why we are in this in a position where we are today in our world. And my view that AI should help us to

understand ourselves and make bring our to some conscious level to awareness about who we are and what we are going to do to continue to thrive like humanity, like civilization. And this is my main mission when I'm investing in AI. I always think about, okay, there is a specific problem AI is solving now. But how this problem looks like a part, looks like a part of the general vision I have to where we're going. And so I developed an interesting approach. There is an AI agent and we challenge this AI agent. Some people tell us that it's disaster.

So AI will kill civilization. Other people think differently. They're optimistic. They think, okay, AI will help to bring civilization to the next level. I don't know. But to my understanding, human has some DNA which connected to the clampum field, I would say. To the field, maybe there is a life beyond our physical life. And definitely we have connections to something that gives us power, gives us intuition,

and gives us something that I'm not sure any machine could have. So when people ask me, oh, AI going to kill humanity because AI outperform humanity and will manage humanity back. And I answer, okay, we all know it's proved that when people die, their soul comes out of the body and people see themselves from the top. Now my question, is machine can do it? Dying? Never. So AI asymptotically will continue to be close and close to human knowledge. I call it ultimate knowledge, yeah?

And human is growing. AI continuously will approach this growing, but will never cross it. This is my understanding of a place of AI in our life. Yeah. And Leon, you bring up a lot of interesting points there, right? Because there is definitely, you know, not just in the startup landscape, but I think in the general population as well. You know, some people are very, you know, kind of looking forward to integrating AI into their everyday life. Some people aren't.

You know, some people are hesitant and they say, oh, you know, I don't trust it, you know, or, hey, this could take my job. So I'm just not, I'm going to stay away from it. But, you know, I specifically want to even ask you about how this is how AI's, rapid implementation into our daily lives is changing the startup scene because it seems like from my vantage point over the last maybe year or two now every single startup that i see is somehow you know integrating AI into their product into their service um have you seen this and is this a good thing or a bad thing for the startup landscape this is very important thing uh today I do not consider any startup if startup doesn't have AI elements or in their operations or in their product.

It's very important because for us, for investors, we are keen to see some optimization of money spent. And today, if you cannot spend money and optimize this spending, you will not succeed. You will be out-compete by other startups. So it's very important. This is what I teach startups. And in my portfolio and like a mentor and advisor, the first thing I start, let's take a look on your operations. Let's take a look on your business processes. How are you doing customer success?

How are you doing marketing and sales? I think today AI should be involved and introduced in all these operations stuff. And if startup doesn't have this, I'm sure I'm not going to invest at all. I'm going to consider this startup at all. But I'm going to help this startup to implement it. I'm going to help. But again, it's too early to say how many startups will implement. But in 2004, I think the most important part of investment dynamics into startup is to have optimal processes that enable to invest less and to get return of investment much more.

You know, Leon, something I'm always thinking of specifically when it comes to startups is it seems like, you know, kind of pre, we'll just say pre-chat GPT because I think that kind of, you know, put this gen AI kind of onto the scene. But it seemed like, you know, something you would always see startups doing is investing heavily in maybe certain areas that they didn't need to. You know, how kind of, so going back to what you just said about, you know, startups needing to work. generative AI with their operations, business processes, customer success. Is this changing how even startup teams should be operating? Do they need to have these huge six-figure development teams, even when they're very small, working on an MVP? Is this going to make leaner, smaller startups able to compete, whereas maybe three, five years

ago they needed a large team? Absolutely. This is exactly the point because when we invest, we're looking for high performance. And we are looking for having this start-up on the cat-age of their development and technology today. Definitely, if they have, for example, have five salespeople and they don't use a CRM that includes AI, just very simple CRM, like Excel or something like this, Definitely, I'm not going to consider this startup like a potential winner. The problem is that it's not, market is not ready, not a lot of HR in AI space. So it's quite difficult to hire people who understand these.

But also my approach, I hire in my companies, I usually hire junior people. I never hire high level professionals. Okay, I can like advisor, right? Like advisor, very good. So my approach, and this is what I ask startups to do. So you should have some junior that has a fresh mind and could learn everything from the beginning without some garbage that this guy bring by the himself by the age of 50. I know it by myself. It's a lot of garbage that really disturbs and you have to remove this garbage.

Not everybody can do it. So we have to have the fresh mind. And then you have to hire advisor, very professional, very senior guy who can help these young guy to grow. So kill two rabbits. First, company will thrive in this case. And second, this guy, young guy, has a huge opportunity to learn quickly and to grow in his career.

I love this. Yeah, I mean, what? Literally, as I say, I love this. Tanya just said, comment, said, I love this. Someone who is a visionary, he can spot potential. Absolutely. So thank you. If you are joining us, please get your questions in.

Dr. Harvey Castor saying, great discussion. I'm working on my startup in AI and healthcare. But a question for you here, Leon, so someone asking, you know, maybe what AI tools are even VCs using these days. So I love that. So we're talking about, you know, how AI is changing things for startups. But, you know, what about for VCs? Is it changing? Are these AI tools changing how you operate and what tools are even VCs using that are kind of AI tools? Absolutely. Today, many VCs using AI tools and a lot of startup developing due diligence AI tools for VCs. I know I just got recently some PG tech or very interesting startup,

which enabled VC to to make due diligence for a couple of hours instead of a couple of weeks. So it's amazing opportunity for VC to have the right decisions because usually VC decide on combination of emotional and analytical stuff. And And AI doesn't have emotional stuff. For example, in Network VC, we put specific plan on investments. So we try to eliminate emotional investment. We invest in company having some numbers and figures already done, like million dollar or two million dollar revenue, high growth, some very top 40 venture capital invested

before this just eliminate some emotional so stuff but again just a couple of days ago i had very interesting conversation with uh we're interesting accelerator and venture fund it's starter net starts i i like this guy i like this their approach and they use the very sophisticated algorithm for startups to do you know. Adobe just introduced an entirely new way to create, bringing the power and precision of its creative suite into one conversational experience. Meet Firefly AI Assistant, now live in the Adobe Firefly app, the all-in-one creative AI studio.

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and creating social variations. Every step the assistant takes is visible so you can refine, redirect, or take over at any time. You stay in the driver's seat as the creative director. Adobe Firefly AI assistant now in public beta. See it today at firefly.adobie.com. You know, as we look forward, so if maybe a startup founder is hearing this and they're saying, oh, you know, maybe we're not using AI in all of these places that we should, maybe we are still, you know, wasting, you know, some of our valuable time and resources by not being

efficient with generative AI. Leon, maybe what are, you know, a piece of advice or two that you might have for people working in startups on if they are kind of struggling to get the most out of Gen AI, how can they do so? First of all, people working in a startup do not have struggle with using AI. If they struggle of using AI, they don't have to work in startup. So startup is a very important filter of people who can and who cannot. Able, enable or not. So a piece of advice or hire mentor.

This is very important. Today, for example, recently I was a judge in one competition. And it was a clear gap between startup founder who has mentor and startup founder, I call them a household, who thinks they know everything, they don't need anybody to help them. Then they come to me back and say, okay, I'm out of money now. What I have to do? I said, okay, you should come to me a year ago. Why didn't?

So this is very important. startup founder should understand if he struggle with something, not about AI exactly, with something, with, I don't know, personal issues, with money issues, with management issues, with everything, with culture. It's very important to build appropriate culture. I have a specific course about how to build the culture. And based on quantum business thinking, this is my methodology. I developed specifically for startup growth. I invite. people to my website, learnaisn.com. So you will learn very interesting, unusual things there.

So I usually I tell, I encourage such entrepreneurs to find mentor. A lot of free mentors around, go to a curator, take a mentor, learn. Because I said before, 99% of startup founders cannot give you elevator pitch. I'm not talking about that they have to do it in the middle of night when you wake up and they have to do it immediately. They cannot do it after, I don't know, 10 minutes of conversation. And that's why pitch deck is totally wrong because usually elevator pitch you build from the pitch deck. First, you build a pitch deck. You identify your objective.

You identify your key results at the end of your journey, startup journey, to understand what kind of exit you have. have to have. And then they don't know how to make a elevator pitch. So if people cannot give me elevator pitch, it means I don't have to open pitch deck because pitch deck is totally wrong. This is what I understand because they didn't get anything through writing this pitch deck. Yeah. It's it's so interesting because I do think, you know, as we start to rely more on these generative AI tools, it does take away. I think, you know, some of the, the startup founders' ability to think and to rationale and to reason and to communicate, because if you do come overly reliant on these J.N.A.Tools, it almost comes

harder. I think, Leon, to maybe, you know, quote unquote, show your work or, you know, hey, how did you come from, you know, from point one to point B? Well, if you relied on, you know, two or three Gen AI tools to do the heavy lifting, that's okay. But you have to be able to, like, you said, you have to be able to still deliver the pitch and to explain the rationale behind the decision-making's. Exactly. As I said before, AI is not me, IBM said. AI by definition should mimic decision-making, but should somebody should make decision-making. So AI mimics, you make it. And you have to calibrate your understanding of AI in order to deliver what AI gave you.

Absolutely. So, you know, we've talked about a lot in today's show so far, you know, everything from some best practices on how startups can, you know, better use generative AI tools, how the landscape is changing a little bit. But one thing I kind of wanted to end today's show on is, is how is AI changing everything for VCs, for, you know, venture capitalists, maybe people in private equity. So, you know, you kind of gave one of.

example of, you know, there's startups even now working on generative AI tools to help VCs kind of, you know, do their due diligence a little faster. But, you know, outside of that, you know, kind of a specific example, how, even for you, how is generative AI changing the role of a venture capitalist and, you know, private equity and these companies that are investing in startups? Dramatically. For me, dramatically. Because first of all, the tax my job, very much accelerate. And second, it accelerate my understanding what I am looking for, because, again, I can use AI for my decision-making. It's very difficult to think out of the blue,

okay, here is a list of cons, here is a list of pros. No, I ask AI, what do you think? But very important to make a correct problem, but actually change my, even change my understanding, how I'm going to invest, how I'm going to build a company. And yeah, it's critical. But I cannot consider how AI help VC industry without considering all the industry. As you know, that Pricewater, Waterhouse said that by 2030, AI will increase our industry growth by 14%. So all goes together. It's like in frontally, like in front. All goes together. So AI introduction in horizontal and vertical, vertical in industrial enterprises. And the whole industry is growing. And venture capital should thrive because optimization of startups, optimization of investment, make automation. of investment tools, reducing some emotional components to some level. It's important, but to some

level for people who cannot give their emotions. But in any case, what I have to say by conclusion, do not think that AI will help to entrepreneurs. This is what I tell to entrepreneurs. AI won't help you unless you have created wow. effect. It doesn't matter using AI, something else, blockchain. It's just finally it will be commodity. It's commodity. Yeah, it's just tool. You like a human being, you should create craft wow effect to success in your business. So much, so much great advice, you know, Leon. So thank you. Like I said, we We covered so many things on this. Thank you so much for coming on the Everyday AI show and just sharing about kind of AI's impact in venture capital.

We appreciate your time. Thank you, Jordan. It was a great conversation. Thank you. Oh, I agree. And hey, there was a lot. You know, Leon mentioned, you know, his website. So make sure you also go to Your EverydayAI.com.

Sign it for the free daily newsletter there because we're going to be recapping, not just everything. that Leon talked about, but there's going to be a lot more. So sharing some different insights and really helping you all unpack this extremely valuable conversation. So thank you for joining and we hope to see you back for another episode of Everyday AI. Thanks y'all. Thank you. Meet Firefly AI assistant now live in Adobe Firefly, the Allman One Creative AI Studio. Just describe what you want to create in your own words and the assistant handles the rest, orchestrating multi-step workflows across Adobe Creative Cloud apps, including Photoshop, Premiere Express, and more in one conversational interface. You direct the outcome while the assistant accelerates execution.

Stand control with the ability to step in and refine at any time. See it today at firefly.adobie.com. And that's a wrap for today's edition of Everyday AI. Thanks for joining us. If you enjoyed this episode, please subscribe and leave us a rating. It helps keep us going. For a little more AI magic, visit Your EverydayAI.com and sign up to our daily newsletter so you don't get left behind. Go break some barriers and we'll see you next time.