Foreign media: While OpenAI and Anthropic continue to draw in venture capital, Insight Partners, which manages assets worth approximately $90 billion, has not shifted to a highly concentrated betting strategy. TechCrunch interviewed the co-managing partner of this institution, Devin Parekh, at an event. He stated that cutting-edge AI companies are indeed important, but in the long run, diversified investment remains a more prudent approach.
Cutting-edge models are attracting huge amounts of capital, while Insight still maintains a decentralized approach.
Parekh mentioned that in the first half of this year, OpenAI and Anthropic together took approximately half of the venture capital funds. Some funds even bet 35% to 40% of their funds directly on one of these two companies.
However, he stated that Insight does not adopt this approach. According to him, if a quarter of the assets of a single fund were allocated to Anthropic, the short-term book return might be better, but in the longer term, excessive concentration does not necessarily lead to better results.
After the valuation heats up, there is a greater tendency to place small bets in the early stages.
Parekh believes that the valuation growth rate of AI in the current primary market has approached the level of 2021. The problem is that the intervals between subsequent financing rounds are very short, and there is limited new operational data. However, prices continue to rise, which means that investors are paying for a higher valuation without in return getting lower risks.
In this case, Insight prefers to get involved in the project earlier, establishing a position with a smaller amount of capital first, and then continuously increasing the investment in companies that perform well. He gave an example of Insight, who continued to invest after the A-round financing of the cybersecurity company Wiz. The resulting returns were significantly higher than if they had only invested in the initial round and not made any additional investments afterward.
Later restrictions on investment in competing products have been relaxed.
When discussing holding both OpenAI and Anthropic equity at the same time, Parekh mentioned that the venture capital industry used to be more cautious about investing in direct competitors, but this boundary has become significantly more relaxed in later financing stages.
He stated that in the early stages, such as during Round A, institutions would typically avoid investing in companies that are direct competitors and would implement stricter information isolation measures. However, in later stages, when they do not join the board of directors or take a leading role in governance, their investment logic approaches that of purchasing a high-quality growing company.
LP places more emphasis on cash flow back
Parekh also mentioned that between 2021 and 2023, a large number of funds completed fundraising, but have not yet returned sufficient cash to LP, which is affecting the subsequent fundraising of some institutions. Insight has repaid over $20 billion to LP through strategic sales and IPO in the past two years.
