Interview, Fireside Chat, Conference Presentation
USV’s New $900M Fund: Fred Wilson, Rebecca Kaden & Mike Mignano
Sourcery with Molly O'SheaFred Wilson, Rebecca Kaden, Mike Mignano, Michael Mignano, Nick Grossman, Brad Burnham, Molly O'Shea
- USV anticipates generating healthy returns for partners by relying on a portfolio of winners in the single-digit billions rather than depending on outliers valued at $50 billion to $100 billion.
- The firm plans to deploy roughly 30 to 40 investments across the current fund, consisting of a mix of seeds and Series A rounds, with a strategic shift toward executing a larger volume of seed investments due to market competitiveness and AI emergence.
- Investment check sizes for Series A rounds are expected to increase slightly to the $10 to $30 million range, aligning with market realities where rounds now typically start at $10 million.
- Proprietary seeds and incubation efforts are projected to comprise between 33% and 50% of all seed investments, while the firm aims to underwrite emerging horizontal markets including robotics, sensor proliferation, and nuclear energy as trillion-dollar opportunities by 2030 through 2050.
- The investment thesis anticipates that inference and compute costs will become a significant line item for startups, leading to a market trend where companies subsidize these expenses to achieve critical mass adoption rather than passing costs directly to customers.
- Market expectations include increased market swings and outcomes, faster and more expensive funding rounds, and a rapid aggregation of value to top players, making the "one or two player" space less viable than the "three or four player" space.
- Strategic focus will shift toward user retention and product innovation, prioritizing engagement behavior over revenue metrics, as products with high trial but low engagement are expected to fail without deep integration into user life.
- USV predicts the emergence of user-owned agents representing individuals rather than single-service tools, while acknowledging that user interfaces will remain essential for specific leisure activities like streaming video or social scrolling.
- The outlook identifies "physical AI" full-stack robotics companies and the "Rebel Alliance" of open-source tools as key investment areas, viewing programmable, cheaper, and faster energy as a critical undercurrent for all new builds.
- Operational and regulatory shifts are expected to include AI lawyers handling 20% to 30% of legal work such as term sheets and significant changes to password reset protocols to accommodate agent-driven account access.
- The firm foresees a growth phase for on-device, private models and biometrics driven by privacy concerns, alongside the expectation that powerful models will soon run locally on smartphones.
- While AI infrastructure is considered built, the firm expects a lag in identifying major applications, similar to the post-2003 internet era, and notes that startups will remain expensive to maintain and operate despite easier product building.
- USV acknowledges that successful companies will likely follow non-linear growth paths, requiring navigation through incorrect go-to-market strategies before finding the right trajectory, and expects the market to evolve rapidly as new technology and applications emerge.