Venture Capitalists Are Leaving Their Firms En Masse

Presented by GOTO Market Institute

Morning SaaS Sentinel Readers. Venture capitalists are leaving their firms in droves, big tech is investing one trillion dollars (with a capital T) into AI, and hustle-culture is back in full-swing in Silicon Valley. Here’s what’s happening in SaaS this week.

• High-profile venture capitalists are making unexpected moves, with many switching firms, starting new ventures, or stepping back from investing.

• Big Tech companies are projected to spend over $1 trillion on AI infrastructure in the next five years, significantly increasing their capital expenditures.

• AI startups in Silicon Valley are reviving hustle culture, with companies like Exa Labs incorporating office nap pods to support their intense work environments

Venture Capitalists Continue to Play Musical Chairs

Something curious is happening in venture capital. High-profile investors like Keith Rabois, Terri Burns, and Ethan Kurzweil are making surprising moves, breaking the industry norm where partners usually stay put. 

For starters, on May 13, Terri Burns announced the launch of her new venture firm, Type Capital. As the first Black woman partner at GV, Burns is now focusing on pre-seed and seed-stage startups.

April also saw some notable transitions. On April 30, Ethan Kurzweil left Bessemer Venture Partners after a 16-year stint. Kurzweil is gearing up to launch a new early-stage-focused investment firm alongside Kristina Shen, who left Andreessen Horowitz in March, and Mark Goldberg, who departed Index Ventures last fall. 

Meanwhile, Christina Farr announced her departure from OMERS Ventures on April 1 (And no, it wasn’t an April Fool’s joke). Farr, who led the firm’s health tech practice, will now focus on her health tech newsletter, book writing, and consulting for health tech founders.

And these names are only scratching the surface. But the real question is: what's driving these shifts, and what might it mean for startups?

While we can’t whip out the old crystal ball and give you a straight answer, one possible reason is the changing landscape of venture capital itself. Emerging sectors like artificial intelligence, blockchain, and biotech present new opportunities, and for some investors, moving to a different firm or starting their own venture may offer a chance to capitalize on these emerging markets. 

You can read the full article below to get the complete list of VCs who have made transitions to new firms or companies in the past few months.

Read more.

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Big Tech’s $1 Trillion AI Investment: What You Need to Know

In the next five years, the combined spending of Amazon, Microsoft, Google, Meta, and Apple on artificial intelligence infrastructure is expected to surpass a staggering $1 trillion. Yes, you read that right — that’s one trillion with a capital T.

This year alone, these tech giants are projected to shell out a combined $200 billion on fixed assets like real estate and equipment. According to a Bernstein research note, the majority of this spending will go towards technical infrastructure, such as land, data centers, servers, and networking equipment. This massive investment is all in service of their ambitious generative AI plans.

AI has been a hot topic for over 18 months now, and the scale of this investment cycle continues to surprise even seasoned analysts. Bernstein predicts that Big Tech’s capital expenditures, or capex, will jump from around 10% of their annual revenue to a hefty 14-15% in the next two years. This is a significant increase, especially considering that these companies have been in cost-cutting mode, shedding assets like real estate over the past couple of years.

To put this into perspective, the $200 billion that Big Tech is expected to spend this year surpasses the total capex of the next 90 telecommunications companies in the S&P combined for the next year. 

This isn’t the first time we’ve seen such concentrated spending from an industry’s largest players. Back in 2013, Big Oil companies like Exxon, Chevron, Total, Shell, and BP collectively spent $166 billion. However, Wall Street quickly called for those companies to rein in their spending and return some of that money to shareholders. 

Interestingly, Bernstein analysts suggest that such blowback might not happen for Big Tech — after all, if they don’t invest heavily in AI, they risk leaving themselves vulnerable to disruption.

Historically, periods of heavy investment like this have only lasted one to three years, but this AI investment cycle might be longer. If AI is truly the next generation of the internet, you can expect this level of spend to remain elevated for a while.

Read more.

The Return of Hustle Culture: Nap Pods and All-Nighters in AI Startups

Silicon Valley’s hustle culture is making a comeback, and it’s bringing some interesting office accessories with it: nap pods in the office. 

Sounds like a dream, right? Well, for Jeffrey Wang, co-founder of AI research startup Exa Labs, it became a reality — and a viral sensation.

Earlier this week, Wang posted on X (formerly Twitter) asking if anyone wanted to join in on an order of fancy-but-affordable office nap pods. The response was overwhelming. He expected to order a couple for his startup but ended up with over 100 people interested. "I had way too many people than I could handle," Wang told TechCrunch. "I wanted to order two nap pods for ourselves, and see how they turned out. I had 100-plus demand."

But the real question is, why are employees napping at work instead of heading home? 

The answer lies in the resurgence of Silicon Valley’s notorious hustle culture. In San Francisco’s Hayes Valley, now dubbed Cerebral Valley, early-stage AI startups are thriving. These startups, often run by 20-somethings, embody a work-hard, live-hard ethos that makes their company the center of their universe.

Exa Labs, a 10-person startup, is a prime example. Until recently, they operated out of a hacker house, a common setup where employees live and work together. Wang described how they converted bedrooms into office spaces, fostering a 24/7 work environment where everyone worked, hung out, and even ate together. The nap pods are just an extension of this culture, allowing employees to recharge without leaving the office.

Wang defends the nap pods, saying they’re not about making employees slaves to their work but about providing a productivity boost. "We live in a world where you don’t always get perfect sleep. If people are tired, they should be able to take a nap. Sleep is basic for productivity," he said. However, he acknowledges that startup life demands an all-in commitment, something he compares to the grueling semesters he experienced at Harvard.

Despite the intense work culture, Wang insists that startup life isn’t for everyone. There comes a point when companies must scale back the hustle to prevent burnout and ensure sustainable growth. This usually happens when startups grow large enough to offer significant equity or when they start hiring employees with families who prioritize work-life balance.

And about those nap pod sheets? Wang assured there would be no hygiene issues. "We had a toga party to celebrate a rebrand and bought 30-40 sheets. We have plenty of sheets," he laughed.

Read more.

Parting Thoughts

Well, that’s the tech news for this week. Hit reply and let us know — did you learn something from today’s newsletter?