(Bloomberg) — Global investors at the world’s largest venture capital firms including Accel and Sequoia Capital India are asking their portfolio companies the same question: How vulnerable are you to artificial intelligence?
Most Read from Bloomberg
The chaotic power of AI was on display earlier this month when online tutoring startup Chegg Inc. saw its stock price slump 48% because of competition from OpenAI chatbot ChatGPT. Now, venture capitalists around the world are evaluating their investments to find out whether AI tools could upend their industries. Chegg’s stock plunge further accelerated such reviews.
“An internal team at Accel is very deeply focused on this,” said Barath Shankar Subramanian, an India-based partner at the firm, discussing AI’s impact to its portfolio of more than 400 startups in South and Southeast Asia. The team is “spending time on the ground both in India and outside,” meeting founders, he said over video. Such an exercise is also ongoing at Accel’s home base in Silicon Valley, he said.
The reviews underscore how generative AI has grabbed the attention of investors, founders and executives, who see it both as a massive opportunity as well as disruptive force. While VC firms are trying to identify the big winners, they’re also trying to weed out the ones whose business models risk being rendered outdated by the new technology.
Sequoia Capital, which similarly has invested in more than 400 startups in India and Southeast Asia, is taking the AI risk “very seriously,” said Anandamoy Roychowdhary, a Singapore-based partner of Sequoia’s Surge, an accelerator for startups in India and Southeast Asia, and the fund’s specialist on AI and deep tech.
The firm has gone through each of its early-stage investments in the region to assess the startups’ preparedness. Meanwhile, more than 75% of new deals made by Sequoia India, the firm’s unit in the region, are related to AI, with the topic dominating its investment meetings.
“The AI wave is going to touch everyone,” Roychowdhary said over video. “In boardrooms across our portfolio and beyond, the discussion is about how to use AI as a strategic weapon.”
A Sequoia startup working in the legal contracts domain and another creating marketing videos will quickly bring in AI, Roychowdhary said. Dozens of portfolio startups working on software development tools will integrate code written by both humans and AI, he said. Some portfolio companies are already auto-generating 50% of their code.
“It’s imperative that startup business models and offerings evolve with the use of AI,” he said. “If not, AI-native companies will come along and out-compete them.”
Sequoia India and Southeast Asia have a 90-minute internal huddle every weekend, called “Learning Sundays,” to familiarize their teams with the latest AI developments and the technology’s potential impact on different industries. Recent topics have ranged from autonomous agents to open-source large language models.
Beenext Pte., a Singapore-based VC firm overseeing a portfolio of more than 100 startups in India, Southeast Asia and Japan, is proceeding with caution in AI investments even as it is bombarded with pitches related to the field, Managing Partner Hero Choudhary said in an interview in Bengaluru.
“The question is whether the AI wave will be deflationary,” Choudhary said.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.