Packy McCormick points out that the claim that 'seed rounds have become more expensive' is similar to judging stock prices based solely on their value, and does not reflect true valuation logic.
The market has earlier and more accurately differentiated high-quality startups and priced them accordingly; whether large funds or small funds, concentrated or diversified, general or vertical, there are both top returns and cases of failure.
Concentrated funds have a higher upper limit, while diversified funds have a higher lower limit; ownership ratios are overestimated, and the alignment between managers and strategies is far more important than portfolio construction.
In the AI sector, excessive chasing of funds and consensus poses risks, and there will be fewer but larger winners in technology.
Source: Public information
ABAB AI Insight
Packy McCormick, as the author of Not Boring and an early investor, has previously analyzed the VC cycle and AI bubble in his newsletter. This critique continues his observations from 2023-2025 regarding 'excess AI capital' and 'distorted valuation narratives.' He has warned that emerging managers overcommit to high ownership to attract LPs, ultimately being outmatched by megafunds in the Pre-seed/Seed stage due to resource advantages.
On the capital path, Packy believes that LPs' high ownership demands for emerging funds will be diluted by increased supply due to competition, while megafunds can patiently wait for optimal targets. Their motivation lies in the current surplus of funds in the AI sector, which rapidly inflates the valuations of good projects. The true winners must find a few potential super winners among companies that are 'long on AGI and short on ASI,' rather than pursuing diversified or standardized portfolios.
Similar to the failures of many funds after the SPAC and crypto booms in 2021, or the 'few winners take all' pattern after the early 2000s internet bubble, the current VC market is in a mid-stage transformation driven by AI towards 'larger and more concentrated' investments, highlighting the challenges of exits and the importance of strategic alignment under strong consensus.
Essentially, this represents capital concentration: the venture capital industry is shifting from a dispersed chase to focusing limited capital on a few potential 10x+ companies through better early pricing and resource allocation to top projects. The mechanism is that market efficiency improvements and AI consensus risks make 'manager-strategy alignment' a core differentiating factor, ultimately concentrating VC pricing power in the few funds and GPs that can capture true technology super winners.