Investors discuss AI pricing, defensibility, and L.A. ecosystem
11 reported
TechCrunch’s StrictlyVC event in Los Angeles featured investors Carter Reum of M13 and Chang Xu of Basis Set Ventures discussing the current AI investment landscape. Reum noted that while past tech cycles had innovators competing only with each other, this cycle adds competition from the ten largest tech companies, giving incumbents an advantage. Xu described the market as both a bubble and not a bubble, citing unprecedented growth curves such as ChatGPT’s revenue surge from $1 to $40 billion in six months. The investors discussed pricing deals in a fast-moving market, with Reum using “cocktail napkin math” and passing on an AI software investment when the numbers did not work. Xu emphasized investing in defensible technical differentiation, noting that infrastructure built for humans now needs to serve AI agents. Both investors highlighted the importance of regulated industries and depth markets, such as healthcare and a company using transgenic chickens for drug manufacturing, as areas less vulnerable to hyperscalers. Reum predicted that the SpaceX IPO will generate significant liquidity in Los Angeles, potentially fueling a second wave of innovation focused on brand, content, and culture.
What’s reported
Carter Reum is co-founder of M13, an early-stage firm with $2.5 billion in assets under management that has been a seed or Series A investor in 17 unicorns.
Chang Xu is a partner at Basis Set Ventures, which launched in 2017 and is now investing out of its fourth fund with nearly $1 billion in assets under management.
Xu stated that ChatGPT went from $1 to $40 billion in revenue in six months.
Xu’s portfolio company Open Art went from $1 million to $10 million ARR in year one, and $10 million to $70 million in year two, cash-flow positive with 20 people.
Reum said that in this cycle, incumbents have the advantage in tech, capital, data, and talent.
Reum described using “cocktail napkin math” to price deals and passed on an AI software investment because the math did not check out.
Xu said the firm invests “below the AI” (infrastructure like databases and deployment tools for agents) and “above the AI” (defensible long-term differentiation).
Reum mentioned a “just-shy-of-a-billion-dollar exit” in a company disrupting 911 call centers with AI.
Xu cited a portfolio company using transgenic chickens as an alternative to manufacturing drugs.
Reum predicted the SpaceX IPO will put significant money into the hands of L.A. employees, generating a second wave of innovation.
Xu stated that the next frontier in AI is “taste” — making films, videos, and content that resonate emotionally.
Key figures
Carter Reum, co-founder of M13
Chang Xu, partner at Basis Set Ventures
Sources: TechCrunch
