Why VC Today is Worse than 2021
Jason Lemkin and Rory O’Driscoll warn that AI vertical investing is repeating the Covid-era mistake of mistaking a demand spike for a permanent TAM expansion.
- Lemkin’s core warning: every CIO is in market for AI tools right now, but buyers won’t repurchase annually — the window will close like Covid-era Zoom or Hopin.
- Revolut raised at $75B with $3B revenue, 60% growth; Lemkin now requires investable startups to have under 1% market share at $100M ARR to avoid TAM exhaustion.
- Sierra (Brett Taylor’s AI customer service co.) valued at $10B on ~$50M ARR implies assumptions of $10B ARR within 5 years — Lemkin calls this overromanticism of vertical AI.
- CIOs at Dreamforce reported highest-ever business process change costs from AI onboarding; they budgeted for vendor price but not training and integration overhead.
- O’Driscoll: best VC vintage years were 2010 and 2015; today feels as tough as ever due to extreme valuation risk, even though deal flow and founder quality are high.
- Lemkin argues Replit will hit $1B ARR easily because vibe-coding collapses the TAM for offshore dev shops and WordPress agencies entirely.
- Venture 30-year pooled returns run ~600bps above small-cap; the asset class is worth doing in aggregate but is deeply cyclical and currently in a euphoric overfunding phase.
2025-10-23 · Watch on YouTube
