Alex Kolicich, 8VC: Exodus of Venture Capital, AI Predictions

Fund Overview & History:

• Alex Kulisic is a founding partner at 8VC, which closed its fifth fund in March with $880 million in new capital.
• 8VC traces its lineage to the predecessor fund Formation 8, which operated as a dual fund (U.S. and Asia teams) focused on data analytics and business process augmentation.
• The firm's investment philosophy centers on the motto "the world is broken, let's fix it," targeting technological catalysts that enable businesses previously impossible.
• Investment allocation is diversified: ~50% in software (vertical/horizontal), ~20% in biotechnology/healthcare, 10% in defense, and 10% in miscellaneous sectors.
• The firm is stage-agnostic but modal activity focuses on Seed to Series A, with occasional Series B and PIPE investments in public companies.
• The name "8VC" is a homage to the "Traitorous Eight," the engineers who left Shockley Semiconductor to found Fairchild Semiconductor and established Silicon Valley.

Venture Capital Market Trends:

• The market is experiencing an "exodus" of investors driven by burnout, reduced investable opportunities, and the aftermath of the 2021 capital boom.
• Tiger Global's massive 2021 capital deployment created a leverage effect where a small ownership stake amplified enterprise valuations 20x, distorting the market and inflating supply.
• Current conditions feature an oversupply of capital relative to high-quality opportunities, leading to firm closures (e.g., Open View, Foundry Group) and partner retirements.
• Kulisic predicts a gradual shrinking of the VC asset class over the next five years unless AI triggers a new cycle, as the asset class cannot scale infinitely.
• 8VC maintained disciplined fund sizing to avoid chasing momentum, positioning itself better than firms that over-scaled during the 2021 peak.

AI Predictions & Market Dynamics:

• Kulisic anticipates AI will be "overhyped" over the next 1–3 years, characterized by a "90-10 problem" where models are correct 90% of the time but the 10% error rate is unacceptable for enterprise use.
• Short-term expectations include infrastructure struggles, deployment disappointments, and a potential "despair period" or crash in two years when hype fades.
• Long-term (next decade) outlook remains positive, with AI expected to dramatically transform knowledge work once reliability issues are resolved.
• Current earnings from Nvidia, Microsoft, and others reflect high excitement and training demand, but do not yet signal broad end-user value creation in the real economy.
• Big Tech (e.g., Meta, Google) is subsidizing the open-source space, making it difficult for startups to compete on model infrastructure alone.

AI Implementation in Portfolio & Industry:

• The most immediate value for portfolio companies lies in internal workflows (e.g., code generation with GitHub Copilot) and document processing/automation rather than external product features.
• Vertical software companies (e.g., Case Next, Blend Labs, Field Guide) are rapidly adopting AI to automate back-office tasks like mortgage origination and audit management.
• Magic.dev is highlighted as a key infrastructure player raising $100 million to build autonomous software engineers, moving beyond autocomplete to full program generation.
• A critical challenge for startups is building a "moat" in an era where AI lowers the cost of development; incumbents with existing distribution and data hold a structural advantage.
• 8VC is actively investing in open-source AI infrastructure (e.g., Ollama) that enables running models locally, anticipating a future ecosystem where open-source iteration eclipses closed-source models.

Founder Advice & Market Outlook:

• The current environment (2024) is described as "grounded" and "energizing," resembling the 2013–2015 era of builders motivated by technology rather than just money.
• Despite the perception of a tight market, Kulisic advises founders to note the existence of significant "dry powder," stating that "investors are not paid to not invest."
• Founders in the Seed to Series B stages are encouraged to focus intensely on product-market fit and customer value creation, as capital availability remains robust for well-executed businesses.
• The sentiment is shifting from the "tough" 2023 climate to a more aggressive capital deployment and valuation environment in 2024.
• The "hype cycle" of AI will likely separate those capable of building durable, long-term businesses from those relying on transient feature parity.