While venture capital firms are actively investing in artificial intelligence as a transformative technology, evidence suggests that AI may fundamentally disrupt the traditional venture capital model itself.
In an AI-enabled environment, human capital is poised to become more valuable than financial capital. This represents a significant departure from conventional venture funding frameworks. Artificial intelligence technologies are empowering entrepreneurs to transform concepts into products using large language models (LLMs) and other AI tools, rather than relying solely on traditional resource-intensive approaches that demand substantial capital investments.
The implications for venture development are profound: entrepreneurs can now progress from ideation to product development and market scaling with significantly reduced time frames and capital requirements. What previously demanded years of development and millions in funding may now be accomplished in months at a fraction of the cost - effectively creating a form of "venture building deflation."
Many established venture capitalists currently view AI primarily as an efficiency tool - automating business plan screening, expediting due diligence processes, enhancing market research capabilities, and accelerating document creation. While these perspectives are valid in the near term, they fail to recognise the more transformative potential that AI presents for the venture ecosystem.
Artificial intelligence can substantially reduce human capital requirements across virtually every aspect of venture development that entrepreneurs previously depended upon. With AI support, a small founding team of two or three capable entrepreneurs could effectively operate a technology company generating multi-million dollar revenue. This is possible because:
The appropriate venture building methodology, when combined with purpose-specific AI tools at each development stage, will construct the venture with minimal human intervention. In this environment, the conceptual innovation becomes the primary asset.
Once products and services are developed, AI can:
The core operational expenses will shift toward software subscriptions, hardware, computational resources, and compensation for experienced business leaders who oversee the AI-driven product development. Consequently, AI-powered ventures may achieve profitability substantially faster than traditional counterparts.
AI systems will also be capable of identifying optimal board members and advisory resources. The new generation of entrepreneurs will have access to strategic and market expertise without traditional venture capital intermediaries that often impose preference shares and dilutive terms.
Perhaps most significantly, AI and AI assistants will connect entrepreneurs directly with funding sources, potentially bypassing traditional venture capital firms entirely.
This phenomenon parallels how younger generations have moved from public social media platforms to private, encrypted communications channels. Similarly, AI will enable business founders to connect directly with individual investors and specialised, entrepreneur-friendly funds that provide targeted value at critical junctures in the venture development process.
Each business function traditionally required by entrepreneurs will be constructed and managed by AI systems - spanning finance, legal, human resources, recruitment, product development, operations, marketing, sales, and customer support. Forward-thinking entrepreneurs will have the capability to build businesses generating tens of millions in revenue, serving thousands of customers, primarily through AI implementation with only a small team of highly capable entrepreneurs managing the overall strategy, product design, and essential customer relationships.
What entrepreneurs will require is access to superior venture development methodologies and the expertise to select appropriate AI tools and create effective AI prompts. In the near future, AI prompt engineering may become a central competency for venture development.
This transformation is not theoretical - it is already underway. Innovative ventures are being developed using these approaches, and pioneering investment firms are creating AI-powered venture development platforms to support and build next-generation companies through networks of entrepreneurs leveraging their AI infrastructure.
The fundamental shift occurring is that venture firms will prioritise human capital over financial capital.
The venture capital organisation of tomorrow will need to possess the most advanced AI venture development platform operating sophisticated company-building processes, and will connect this infrastructure with exceptional entrepreneurs to manage each venture generated from the system. Effectively, the venture capital firm itself will function as an AI system with an associated network of entrepreneurs.
One example of this new venture model is Steel Perlot, backed and led by former Google Chairman Eric Schmidt. This relatively new firm aims to identify, invest in, and develop multi-generational platforms capable of attracting billions of users and transforming entire economic sectors.
Their stated objective is to catalyse systemic change in domains where exceptional talent and technology can produce breakthroughs with widespread adoption. They employ a hybrid approach - sometimes investing, often building directly—but only supporting initiatives they believe will achieve global scale. While still in early stages, this organisation represents an emerging paradigm.
LettsGroup, a European entity (and parent company of The LettsJournal), represents another example of this evolution. This organisation positions itself as a new category of venture capital group that builds and backs capital-efficient ventures through their AI VentureFactory, which they believe delivers superior returns through systematically improved venture success rates.
The company has progressed further along this trajectory with several successful ventures launched through their methodology. Rather than expecting all portfolio companies to reach billion-dollar valuations, they focus on developing profitable, sustainable enterprises. Their investment thesis concentrates on platform businesses in Web3, artificial intelligence, and climate technologies. Their growth strategy emphasises technological leverage rather than human resource expansion.
This UK-based organisation maintains a substantial and expanding network of experienced venture leaders who each contribute to multiple ventures, presumably to maintain engagement and enable the firm to capitalise on group dynamics and ecosystem-driven portfolio synergies. In essence, they support experienced entrepreneurs with tools, technologies, and systems designed to accelerate and enhance outcomes, with capital access integrated into their methodology.
If pioneering AI-enabled venture capital firms like Steel Perlot and LettsGroup represent the future direction, tomorrow's entrepreneurs may integrate with venture factory platforms rather than traditional legal structures that offer limited value beyond capital while often transferring ownership to the venture firms intended to support them.
The AI-enabled future should ultimately empower entrepreneurs more effectively than simply enriching venture capitalists, creating more direct connections between entrepreneurs and the institutional investors that have traditionally funded venture capital organisations. This represents a fundamental restructuring of power dynamics in the entrepreneurial ecosystem—a transformation that shifts greater control and value creation potential to innovative founders.
This article was developed from insights first published on LettsJournal.
