M13 and Basis Set VCs discuss AI valuation strategy amid hyperscaler competition
Carter Reum of M13 ($2.5 billion AUM) and Chang Xu of Basis Set Ventures ($1 billion AUM) discussed how AI startup valuations reflect unprecedented growth curves but require careful analysis of defensibility against larger competitors with capital and data advantages.
Carter Reum of M13 and Chang Xu of Basis Set Ventures told a StrictlyVC event in El Segundo on June 19 that AI startup valuations reflect growth curves never before seen, but investors must account for displacement risk from OpenAI, Anthropic, Google, and other hyperscalers with structural advantages in capital, data, and talent [1].
Reum, whose $2.5 billion early-stage firm has backed 17 unicorns, and Xu, a partner at Basis Set's $1 billion fourth fund, said ChatGPT's jump from launch to $40 billion in revenue in six months and portfolio company Open Art's acceleration from $1 million to $10 million ARR in year one and $10 million to $70 million in year two have reset expectations for what qualifies as strong growth [1]. Xu described the market as "both a bubble and not a bubble," noting that terminal valuations appear justified when pricing in compounding growth, but warned that applying that math to every deal guarantees portfolio losses [1].
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