The surface explanation for AI concentration is “VCs are bullish on AI.” The structural explanation is different: fund managers need to return capital to their investors, and AI offers the only viable path within fund lifecycles.
Venture funds raise money from Limited Partners (LPs)—pension funds, endowments, family offices. LPs expect returns within fund lifecycles (typically 10 years). The problem: recent fund vintages have returned almost nothing.
Median Net IRR by vintage year:
2017: 10.7%
2018: 7.8%
2019: 5.8%
2020: 3.3%
2021: 0.2% (barely positive)
2022: -0.9% (negative)
2023: -5.0% (deeply negative)
Zero Cash Returned
DPI (Distributions to Paid-In)—actual cash returned to LPs—tells an even starker story. The 2021 vintage—the largest in history at $220B deployed—has returned almost nothing after four years. LP stress is showing: 12-13% of capital calls at smaller funds are now paid at least one week late.
Traditional startups take 7-10 years to reach meaningful scale. AI-native companies reach $1B revenue in 2-3 years. AI isn’t just a better bet—it’s the only bet that fits the timeline.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
