AI VCs Split on Bubble as SpaceX IPO Looms for LA
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- Chang Xu called current AI valuations "both a bubble and not a bubble," citing ChatGPT's six-month revenue ramp from $1 billion to $40 billion as an unprecedented growth curve that resets how VCs price terminal value.
- OpenArt, a Basis Set portfolio company, scaled from $1M to $70M ARR in two years with 20 employees and stayed cash-flow positive — Xu cited it as proof that founders iterating at the right moment can turn "bad ideas" into breakout businesses.
- Carter Reum argued this cycle is different from cloud, iPhone, or auto because the 10 largest tech companies now have the advantage in capital, data, and talent, making AI startups more likely to "rise and fall" rapidly than in prior cycles.
- Basis Set Ventures invests "below the AI" in agent infrastructure (Xu named several teams building "the GitHub for agents") and "above the AI" where defensible differentiation compounds — and separates "depth markets," where hard problems stay hard, from "velocity markets" where fast-followers dominate.
- M13 built a thesis around "friction as a moat" in regulated industries, with Reum citing a just-shy-of-$1 billion exit in AI for 911 call centers as proof hyperscalers won't touch small regulated markets soon.
- Reum predicted the SpaceX IPO will spread wealth across LA employees far more broadly than an Anthropic or OpenAI IPO, seeding a second-wave startup cycle akin to how Riot Games, Tinder, and Snap followed prior LA liquidity events.
- Xu argued the next AI frontier is "taste" — culturally resonant creative output — and that LA's strengths in brand, content, and culture position it to lead after the current compute-driven wave plateaus.
Why it matters: Early-stage AI founders learn which categories VCs are still actively chasing — agent infrastructure and regulated friction plays like 911 call centers — versus which are saturated with wrappers. Reum also argued the SpaceX IPO will spread wealth across LA more broadly than an Anthropic or OpenAI IPO, seeding a new startup wave beyond Riot Games and Snap.
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