Venture Legal, Ed. 7: The One-Person, Billion-Dollar VC Fund of the Future?
Venture Legal Series #7
Abstract
Just as OpenAI CEO Sam Altman famously pondered the idea that AI could allow for the creation of a "one-person billion-dollar company,” I recently wondered: Could we also see a one-person billion-dollar VC fund?
The topic of AI's role in transforming venture capital has been making headlines, with a recent Forbes article citing industry reports indicating around a third of VCs find at least half their deals through such tools, and as firms such as AI-powered VC firms like SignalFire and QuantumLight have been announcing new funding rounds.
In last week’s edition of Venture Legal, I took a look at some of the ways Venture Capital firms are implementing AI to be leaner, more effective and achieve better outcomes, including using AI to:
⭐ Streamline teams.
⭐ Assist with deal cycle and valuation.
⭐ Automate marketing and communications.
Full Article
In March, OpenAI was reported to have closed the largest private tech funding round on record, as a $40 billion financing valued the company at $300 billion.
VC funding of AI companies continues to set records and make headlines, and, at the same time, AI technology is also transforming the business model of VC firms themselves.
As PYMTS wrote, “In the venture capital (VC) world, artificial intelligence (AI) is no longer just a hot sector to pour money into — it’s now an essential tool for making savvy investment decisions.”
After diving into the AI startup boom and some of the ways in which VCs are diversifying their models in the last newsletter, I was inspired to embark on a bit of a thought experiment: envisioning the VC firm of the future. This idea intrigued me, especially given my long history creating an efficiency-minded business model that’s heavily tech-driven in the legal services realm.
Just as OpenAI CEO Sam Altman famously pondered the idea of a "one-person billion-dollar company,” noting that such a concept “would have been unimaginable without AI and now will happen,” I wondered:
Could we also see a one-person billion-dollar VC fund?
Perhaps that may seem far-fetched, but the fact is that, as stated in Forbes, “As AI models become more sophisticated, VCs are increasingly using the technology to outcompete rivals to the best deals, with industry reports indicating around a third of VCs find at least half their deals through such tools.”
Last week, Revolut founder Nik Storonsky's venture capital firm QuantumLight secured $250 million in funding, with Josipa Majic Predin writing in Forbes the funding marked “..a significant endorsement for its AI-driven investment strategy. In a venture capital landscape where artificial intelligence is increasingly becoming a differentiator, QuantumLight stands out with its ambitious claim that all 17 of its investments to date have been identified by proprietary machine learning algorithms rather than traditional human-led deal sourcing.”
And, in April, TechCrunch reported, “SignalFire raises over $1B as LPs embrace data-driven investing,” noting that “SignalFire’s approach is unique because, unlike other VCs that use data, (SignalFire) integrates AI into every aspect of the investing process — from identifying promising early-stage startups to helping portfolio companies with recruiting and product marketing.”
I wanted to take a closer look here into how AI enables VC firms to be leaner, more effective - - and ultimately achieve better outcomes for their LPs including:
Leveraging AI to streamline teams.
Perhaps we’re not quite ready for the one-person billion-dollar AI-powered VC firm, but I’ve always been a fan of and advocate for lean, highly efficient and skilled teams and AI tools are helping VC firms streamline workflows.
Pitchbook’s headline in May read, “Could AI ever be an early-stage VC? It’s already replacing their associates.”
The article quoted Jackie DiMonte, general partner at pre-seed and seed firm Grid Capital, as saying, “The thing we’re seeing over and over again is you just don’t need to hire in the same capacity anymore.”
As Pitchbook reported, “Many GPs have created custom workflows with OpenAI’s ChatGPT or Anthropic’s Claude, and they are finding AI to be many times faster at market modeling and data collection than an entry-level venture analyst.”
“We are now empowering people to automate the mind-numbing parts of their job,” said Mike Collins, Founder and CEO of Alumni Ventures in an interview with Venture Capital Journal who initiated a firm-wide contest to identify AI applications relevant to workflows. Venture Capital Journal reported that in addition to using general tools like ChatGPT to prepare pre-meeting memos and help with research, roughly half the AI tools Alumni Ventures plans to use are proprietary ones being built internally.
Agentic AI is also playing a key role. Writing in Forbes, Douglas Laney reported, “AI agents will function as chief-of-staff to handle the overwhelming number of pitch decks and launch announcement emails sent daily to VCs for prioritizing which founders to meet. From a certain angle, these agents can be observed moving up to junior associate positions, where they handle initial meetings between investors and founders before providing recommendations based on existing information about opportunities and founders.”
Deploying AI to assist with deal cycle and valuation.
VC firms are implementing a variety of AI tools to assist in deal cycle, due diligence, valuation, and more.
Max Wolff, co-founder and CEO of VC AI platform Systematic, told Venture Capital Journal that he has found that VCs are comfortable having a vendor automate heavy-duty parts of the deal cycle, noting “.. we can do about 70 percent of the underwriting evaluation and monitor them.” Wolff added, “Most incubators and accelerators spend 70 to 80 percent of their budget doing an often-unconvincing version of what the technology can do, except for the human interaction part. We're not trying to replace human beings. We’re just trying to give them back their time to have the human-to-human interaction, which is the backbone of the venture.”
Likewise, as the AI-powered platform Visible explains on its blog: “One of the most significant advantages of AI in venture capital is the automation of deal flow processes. AI tools can sift through vast amounts of data to identify potential investment opportunities, filtering out noise and focusing on startups that meet specific criteria. This automation significantly increases efficiency, allowing venture capitalists to allocate more time to engaging with high-potential deals rather than searching for them.”
The blog cites the example of Caena, which utilizes AI to automate the process of finding and assessing potential investment opportunities, “making it easier for venture capitalists to discover startups that align with their investment thesis.”
As the Visible blog states: “AI plays a crucial role in the evaluation and due diligence phase, analyzing extensive datasets to assess a startup's financial health, market potential, and operational viability. This capability enables venture capitalists to conduct a more thorough and accurate assessment of potential investments, reducing the risk associated with early-stage startups.”
In a piece for Crunchbase, Ivan Nikkhoo, managing partner at Navigate Ventures, cited using tools such as TechScout and Tracxn to enhance the ability to “model multiple scenarios, benchmark valuations and negotiate favorable deal structures aligned with founder and investor goals.”
Also aiding in due diligence is Termina, a quantitative due diligence AI startup incubated and spun out of Tribe Capital that was founded by Alex Chee, one of Tribe’s earliest employees. Others use Index-backed Hebbia, which offers due diligence and portfolio management tools, Pitchbook reports.
Venture Capital Journal also pointed towards OpenAI’s recently launched DeepResearch tool, noting it could be a powerful co-pilot for investment associates for authoring deal memos and doing industry diligence.
There are other benefits to such AI tools, too. Roman Eloshvili, the founder of xData Group, a B2B software development company, told PYMNTS that AI could reduce bias in founder screening. Algorithms can be programmed to prioritize objective criteria over subjective judgment. “This unbiased screening process can increase diversity within venture capital portfolios and may lead to the discovery of overlooked gems,” he said.
Utilizing AI for marketing and communications.
Confession: When I first heard of Pickle, I thought the idea of having an “AI clone” to be a bit odd.
If you haven’t heard of it, Y Combinator describes Pickle as your own person “AI clone that lip-syncs to your voice in real time,” explaining that it “replaces your camera feed and makes you look great—even if you’re calling in from bed, the couch, or while walking around.”
A few months since I first heard of the product, I’m starting to come around to the idea that my Pickle AI clone could stand in on camera for me, while my real self is free to move about the cabin, so to speak. How liberating!
Pickle is just one example of an innovative AI tool that’s transforming communications.
Recently, VC firm Array Ventures debuted a series of AI-generated podcasts, created with no training data and using content from guests’ other interviews on the web, solving “pain points” around producing their podcast.
In addition to standing in for you on Zoom and generating your podcast, tools like HeyBoss can create AI-generated websites in minutes, while LLMs can help generate content for blogs and graphics.
Look for more firms to implement AI to facilitate and optimize marketing and communications efforts.
➡️ Bottom Line
Marc Andreessen made headlines in May when he said about the work of VCs: "When the AIs are doing everything else, that may be one of the last remaining fields that people are still doing,” underscoring the essential role that humans play in the venture capital industry.
While the human touch may always be essential, expect to continue to see AI change the way VCs operate, a transformation we’ll continue to track here.
🎙️ Podcasts & Thought Leadership
It was such a pleasure to join Robert Ambrogi on the LawNext podcast! Together, we had a chance to talk about my career journey, the current LegalTech landscape, the role of AI, and what’s next for the legal industry.
Thanks to Bob for having me as a guest – and for his longtime leadership in LegalTech.
🎧 Listen to the episode: https://lawnext.libsyn.com/ep-291-serial-legal-entrepreneur-monica-zent-on-building-the-future-of-legal-services
💬 Let’s Connect!
What are your thoughts on how AI will change the way VC firms operate? Drop a comment, share your insights, or suggest a topic for my next issue!
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