Oren Zeev: AI is the biggest change in human history | 20VC

Key Takeaways

• Prioritizing growth over sustainable business practices can be a risky mindset in venture capital.
• AI is positioned as a transformative force, marking the biggest change in human history.
• Investing in startups that appear unconventional can lead to significant opportunities due to reduced competition.
• The competition in startup investing has intensified significantly over the past decade.
• Investors must assess whether companies will benefit from or be victimized by AI to make informed decisions.
• Current market fears of AI disruption lead to undervaluation of software companies.
• Over time, some software companies will appear expensive despite discounts, while others will benefit from AI.
• AI is expected to enhance customer support and improve gross margins for companies like Navan.
• Incumbent companies may not be as vulnerable to disruption as commonly believed.
• Operational complexity and data ownership are key factors protecting businesses from disruption.
• The venture capital landscape is evolving with increased competition and the impact of emerging technologies.
• Understanding the implications of AI on business models is crucial for future investment strategies.
• The market’s inability to differentiate between companies negatively or positively impacted by AI affects valuations.
• The role of technology in business adaptation is critical for incumbents to remain competitive.
• Data ownership provides a competitive advantage, especially in the age of AI.

Guest intro

Oren Zeev is the founder and sole General Partner of Zeev Ventures, a Silicon Valley-based venture capital firm managing over $1 billion in assets under management. He previously served as a General Partner at Apax Partners, where he led the firm’s early investment in Audible, achieving a 10x return upon its $310 million sale to Amazon. Zeev is renowned for his radical alignment model, taking zero management fees while applying 30% carry to investments in successes like Navan, Houzz, and Chegg.

The dangers of prioritizing growth over sustainability

• The notion that only growth matters is a dangerous mindset.

  — Oren Zeev

• Emphasizing growth without sustainable practices can lead to long-term risks.

• I’ve seen this movie many many times.

  — Oren Zeev

• Sustainable business practices are crucial for long-term success.
• The venture capital industry often focuses excessively on growth metrics.
• A balanced approach between growth and sustainability is necessary.

• Understanding the implications of prioritizing growth over sustainable business practices.

  — Oren Zeev

• Investors should evaluate the sustainability of business models alongside growth potential.

AI as a transformative force in human history

• AI represents the biggest change in human history.

  — Oren Zeev

• The impact of AI extends across various sectors and industries.
• AI is driving significant shifts in technology and societal structures.

• AI is the biggest change ever in the history of humanity.

  — Oren Zeev

• The transformative potential of AI is reshaping business models.
• Understanding AI’s implications is crucial for future investment strategies.
• AI’s influence on industries will continue to grow over time.
• The rise of AI presents both opportunities and challenges for businesses.

The value of investing in unconventional startups

• Investing in startups that seem weird or wrong can lead to significant outcomes.

  — Oren Zeev

• Reduced competition in unconventional markets offers unique opportunities.

• If they look weird and they look wrong then probably there aren’t gonna be 15 or 20 or a 100 other startups doing it.

  — Oren Zeev

• Contrarian thinking can yield significant investment returns.
• Identifying unique opportunities in less crowded markets is strategic.

• You have a chance of really building something no a real moat.

  — Oren Zeev

• The competitive landscape in startup investing is evolving.
• Investing in unconventional startups requires a long-term vision.

The increasing competition in startup investing

• The level of competition in startup investing has significantly increased over the past decade.

  — Oren Zeev

• More startups are vying for investor attention and funding.

• For every company I meet there’s legitimately eight to 10 at a minimum.

  — Oren Zeev

• The startup ecosystem is becoming more crowded and competitive.
• Investors need to differentiate between viable and non-viable startups.
• The evolving dynamics in the startup ecosystem affect investment decisions.
• Increased competition requires more strategic investment approaches.
• Understanding the competitive landscape is crucial for investors.

Evaluating the impact of AI on investment decisions

• Investors must evaluate whether companies are likely beneficiaries or victims of AI.

  — Oren Zeev

• AI’s impact on business models is a critical factor in investment evaluations.

• If the answer is that they’re a victim of AI obviously it’s an easy answer.

  — Oren Zeev

• The rise of AI necessitates a shift in investment evaluation criteria.
• Understanding AI’s implications is essential for informed investment decisions.
• AI presents both opportunities and threats to different industries.
• Investors need to assess AI’s potential impact on company performance.
• The future of investment strategies will be influenced by AI’s rise.

Market undervaluation of software companies due to AI fears

• The market currently undervalues software companies due to fears of AI disruption.

  — Oren Zeev

• Investor fears of AI impact lead to discounted valuations for software companies.

• Most software companies are getting somewhat of a discount because of that justified fear.

  — Oren Zeev

• The market’s inability to differentiate between AI winners and losers affects valuations.
• Understanding market sentiment towards AI is crucial for investors.
• The current market trend presents both risks and opportunities for investors.
• Software companies may be undervalued despite their potential to benefit from AI.
• Investors need to discern between companies negatively and positively impacted by AI.

The long-term impact of AI on software company valuations

• Over time, some software companies will prove to be expensive despite current discounts.

  — Oren Zeev

• AI will lead to a divergence in company performance and valuations.

• For some companies the suspicion is gonna materialize and in fact even with a discount they’re gonna in hindsight look very expensive today.

  — Oren Zeev

• The long-term impact of AI on software companies will vary.
• Investors need to anticipate AI’s effects on company performance.
• Understanding AI’s long-term implications is crucial for investment strategies.
• Companies benefiting from AI will see improved valuations over time.
• The market will eventually recognize AI’s impact on different software companies.

The role of AI in improving business operations

• AI is expected to significantly improve customer support and gross margins for companies like Navan.

  — Oren Zeev

• AI implementation can lead to operational efficiencies and cost savings.

• Almost all the support is gonna be done by AI already.

  — Oren Zeev

• AI’s impact on financial metrics is significant for business operations.
• Companies like Navan can benefit from AI-driven improvements.
• Understanding AI’s operational benefits is crucial for business strategy.
• AI’s role in enhancing customer support is a key advantage.
• The practical benefits of AI implementation are evident in business contexts.

The resilience of incumbent companies to disruption

• Incumbent companies are not as vulnerable to disruption as some believe.

  — Oren Zeev

• Many incumbents can adapt and benefit from AI advancements.

• As long as they don’t fall asleep on the wheel and as long as they… adapt, they’re gonna be huge beneficiaries of AI.

  — Oren Zeev

• Operational complexity and adaptability protect incumbents from disruption.
• The competitive landscape is not as straightforward as often portrayed.
• Incumbents with strategic adaptation can thrive in the age of AI.
• The narrative of inevitable disruption is challenged by business realities.
• Understanding the role of technology in business adaptation is crucial.

The importance of operational complexity and data ownership

• Operational complexity and data ownership are critical factors that protect businesses from disruption.

  — Oren Zeev

• Businesses with complex operations and data ownership have a competitive edge.

• The more operationally complex a business is… the harder it’s gonna be.

  — Oren Zeev

• Data ownership provides a significant advantage in technology-driven markets.
• Incumbents with data ownership are well-positioned in the age of AI.
• Understanding the role of operational complexity is crucial for business strategy.
• The competitive advantage of data ownership is evident in AI-driven markets.
• Businesses that leverage operational complexity and data ownership can thrive.