General Catalyst Makes Big $8 Billion Play In AI Investment

A picture taken on December 7, 2021 in Istanbul shows US dollars banknotes. - Turkey's annual ... [+] inflation rate jumped over 20 percent in November, official data showed on December 3, 2021, after a currency crisis last month in which the Turkish lira hit record lows against the dollar. (Photo by Ozan KOSE / AFP) (Photo by OZAN KOSE/AFP via Getty Images)

Nobody would call General Catalyst a small fish. But there are a lot of new interesting details in recently released news, about how this VC firm is spending around $8 billion to pursue novel strategies in applying AI to the business world.

Obviously, there are nearly endless ways to do this. General Catalyst is well positioned, as a firm with some $30 billion in assets and a track record of shoring up startups like Airbnb, Instacart and Stripe.

The New Investment Strategy for Artificial Intelligence

General Catalyst CEO Hemant Taneja recently announced the company would be putting $4 billion into a core VC account, and $800 million into a “creative” strategy play involving startups. Here’s how GC describes the fund:

“The $800M Creation fund allows us to place a renewed focus on company creation and productize that approach–working with entrepreneurs and execs to either hatch or fundamentally transform companies in our core areas of interest. GC’s hatch strategy has always been foundational to the firm, and was a driver of some of our notable early successes (Kayak, Livongo, Commure). Supported by our growing team of Executives-In-Residence, we intend to expand our efforts around original thesis development and company building.”

One thing to note from relevant coverage is that General Catalyst appears to be building the tech stack first, and then inserting it into newly acquired enterprise systems in different verticals. This is strange enough, but when Taneja suggests the company wants to “build companies rather than fund them,” you sort of wonder what form that’s going to take.

Putting On the Brakes

If it’s any reassurance, though, Taneja appears to have been suggesting some modicum of caution when it comes to forging ahead with AI, going back to his comments in 2019:

“Many of today’s entrepreneurs live by Facebook founder Mark Zuckerberg’s now-famous motto: ‘Move fast and break things.’ Zuckerberg intended for this to inform internal design and management processes, but it aptly captures how entrepreneurs regard disruption: more is always better. We raced to put our products into consumers’ hands as fast as possible, without regard for the merit of—and rationale for—offline systems of governance. This is increasingly untenable.”

Words of caution like these may be what we need right now, as hyperbolic bandwagoning is always a temptation.

Getting Bigger with AI

Anyway, it was also interesting to read Taneja’s observation on growth in this particular field, where he stated, in a recent interview:

“Behind the moves that we are making is the fundamental observation that venture capital does not scale – there are the same number of outlier companies, whether you make the funds bigger or … smaller.”

It seems strange for VC people to think that AI injection, or really, anything else, would scale infinitely, but that’s the disclaimer that Taneja is making. He also talked about acquiring a medical provider directly, and integrating AI into that area, suggesting, in a way, that this sort of investment should really be hands-on.

Is AI Disruptive?

In related news, Jeannette zu Fürstenberg, who heads La Famiglia in Europe and is General Catalyst’s Managing Director, talks about the importance of national tech sovereignty and global resilience, and Ken Chenault, also billed as Managing Director, suggests that the company’s plays will have a big impact, saying “we don’t see a conflict between profit and purpose.”

Fürstenberg , for her part, also makes some interesting comments on the nature of AI investment. Take a look at this, which was reported as her quote:

“Our belief system is that AI, at the core, is not a disruptive technology. It doesn’t give you new distribution avenues. It basically gives you a transformation angle into existing categories. … If you look at Europe, the benefit we can really derive from AI comes down to how it intersects with many of these vertical strengths that we have.”

The idea that AI is “not disruptive” needs some qualification, but there’s a lot to unpack there. Certainly, General Catalyst is paying attention to the major tech wave we are all experiencing at the moment. As for risk taking, Taneja, also per the TechCrunch coverage, declares: “We’re in the risk taking business.”

(Original Caption) September 1958-Las Vegas, Nevada: Man rolls the dice at a crap table at the Hotel ... [+] Flamingo in Las Vegas. BPA2# 2068

As we look at OpenIA creating new models, and new kinds of neural networks solving resource problems, this news gives us a window into how the business world is embracing its newfound capabilities. There will inevitably be early adopters who get in on the ground floor, and dominate this stage of AI advancement in business. What happens next is sort of a black box.

One Community. Many Voices. Create a free account to share your thoughts.

Our community is about connecting people through open and thoughtful conversations. We want our readers to share their views and exchange ideas and facts in a safe space.

In order to do so, please follow the posting rules in our site's Terms of Service. We've summarized some of those key rules below. Simply put, keep it civil.

Your post will be rejected if we notice that it seems to contain:

User accounts will be blocked if we notice or believe that users are engaged in:

So, how can you be a power user?

Thanks for reading our community guidelines. Please read the full list of posting rules found in our site's Terms of Service.