Key Takeaways
- • Venture capitalists are increasingly divided over whether "neolabs" (research-first AI startups founded by defectors from OpenAI, Google DeepMind and similar labs) can justify multibillion-dollar valuations, according to Business Insider's VC Insider reporting.
- • Valuations cited include Jeff Dean's reported target of up to $50 billion, Safe Superintelligence at $32 billion, and Thinking Machines Lab raising at around $40 billion.
- • Menlo Ventures partner Matt Murphy called neolabs the most overhyped sector, warning that raising such large rounds carries the risk of "starting a match with a bonfire."
- • Radical Ventures' Aaron Rosenberg described neolabs as a power-law bet taken to an extreme, where most will burn capital without profitability but a rare winner could be worth hundreds of billions.
- • Bullish VCs such as Radical Ventures and New Enterprise Associates say talent flows from incumbents and academia continue, with some neolabs finalizing billion-plus equity rounds.
Summary
Business Insider reports that venture capitalists are questioning the economics of neolabs, the lavishly funded, research-first AI startups founded by top talent who left firms such as OpenAI and Google DeepMind. The column notes that it was recently a favorable period to be a neolab founder, but that a growing divide has emerged among VCs in Silicon Valley over whether these companies can justify multibillion-dollar price tags while facing competition from frontier labs.
The reporting cites several high-profile valuations. Jeff Dean, Google's former chief scientist, is reportedly seeking a valuation as high as $50 billion for his new AI science startup. OpenAI cofounder Ilya Sutskever's Safe Superintelligence is worth $32 billion, and Mira Murati is raising a round for Thinking Machines Lab at a valuation of around $40 billion. One unnamed VC at a top firm described neolabs as the most hotly debated investment category, with some investors refusing to back them and others viewing them as one of the few remaining areas worth investing in.
Menlo Ventures partner Matt Murphy, speaking at Business Insider's Growth Mode conference, named neolabs as the most overhyped sector, notably even though Menlo has invested in some of them. Murphy compared the current environment to an early Google investment that performed well, saying the risk now lies in companies raising very large rounds. Fellow Menlo partner Deedy Das posted about the "difficult game" of making neolab economics work, and later said that, as with all startups, many will fail and some will succeed.
Supporters argue the asymmetric payoff justifies the risk. Radical Ventures' Aaron Rosenberg said neolabs are a power-law bet taken to an extreme, with most likely to burn large sums on compute and talent without becoming profitable, while the rare winner could become a foundational AI company. Rosenberg said talent continues to leave incumbents and academia for founder roles. New Enterprise Associates partner Andrew Schoen, whose firm published a bullish view in June, said his position has not changed and that some neolabs are finalizing billion-plus equity rounds.
The column also notes related market activity, including Fireworks AI reportedly seeking funding at a valuation of $30 billion to $40 billion, and robotics startups commanding high valuations with limited revenue so far.
The reporting cites several high-profile valuations. Jeff Dean, Google's former chief scientist, is reportedly seeking a valuation as high as $50 billion for his new AI science startup. OpenAI cofounder Ilya Sutskever's Safe Superintelligence is worth $32 billion, and Mira Murati is raising a round for Thinking Machines Lab at a valuation of around $40 billion. One unnamed VC at a top firm described neolabs as the most hotly debated investment category, with some investors refusing to back them and others viewing them as one of the few remaining areas worth investing in.
Menlo Ventures partner Matt Murphy, speaking at Business Insider's Growth Mode conference, named neolabs as the most overhyped sector, notably even though Menlo has invested in some of them. Murphy compared the current environment to an early Google investment that performed well, saying the risk now lies in companies raising very large rounds. Fellow Menlo partner Deedy Das posted about the "difficult game" of making neolab economics work, and later said that, as with all startups, many will fail and some will succeed.
Supporters argue the asymmetric payoff justifies the risk. Radical Ventures' Aaron Rosenberg said neolabs are a power-law bet taken to an extreme, with most likely to burn large sums on compute and talent without becoming profitable, while the rare winner could become a foundational AI company. Rosenberg said talent continues to leave incumbents and academia for founder roles. New Enterprise Associates partner Andrew Schoen, whose firm published a bullish view in June, said his position has not changed and that some neolabs are finalizing billion-plus equity rounds.
The column also notes related market activity, including Fireworks AI reportedly seeking funding at a valuation of $30 billion to $40 billion, and robotics startups commanding high valuations with limited revenue so far.
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