Is your VC helping you secure GPUs?

How small funds can compete with big firms by innovating their business models.

Author

Michael Morgenstern
October 30, 2024

Happy Wednesday Brex community,

As GPU shortages intensify, AI startups face stiff competition from tech giants like Google, Meta, and Microsoft, who lock down supplies with large contracts. Some VCs are stepping up to help level the playing field. For example, Andreessen Horowitz's Oxygen program provides its portfolio companies access to a massive cluster of Nvidia H100 GPUs without having to negotiate and compete on market rates.

Fund sizes have ballooned, making the 2% management fee a significant income stream. Some investors might focus on maximizing this guaranteed fee rather than the variable 20% carried interest, leading to rapid capital deployment without aligning long-term interests. Is this an era of misaligned incentives? Or do large fund sizes enable bulk purchasing which proves to be measurable portfolio value add!

So how can emerging managers with smaller funds compete? One way is by not relying on the 2% management fee. By developing alternative cash flows that create a flywheel effect aligned with their investment thesis, they reduce pressure on the management fee and unlock more creativity. If emerging managers see themselves as founders too, they can innovate their business models just like the companies they invest in.

Expect more from your investors and dream bigger.

If you're working with such forward-thinking managers, share how they're helping you navigate these challenges. Write us or join our events to discuss.

Growing together, Michael Morgenstern

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Andrew Hoh is the co-founder of LastMile AI

LastMile AI is an industry-leading platform to productionize enterprise-grade AI applications. The platform reduces hallucinations and improves accuracy for LLM applications through state-of-the-art machine learning models. LastMile helps enterprises safely and confidently launch AI capabilities into production.

Ambassador’s Perspective: The future of generative AI lies with software engineers leading AI application development. LastMile AI builds a production-ready platform that reduces hallucinations and enhances accuracy, empowering companies to deploy reliable AI at scale. This accessible approach unlocks a vast market of AI-driven innovation across industries.

Nick Chirls, Jon Wu, and Mackenzie Regent are a General Partner at Asylum Ventures

Asylum Ventures is a new venture firm dedicated to the creative act of building companies. The team raised $55 million to invest $1-2 million in early-stage founders practicing the art of making startups.

Founded by Mackenzie Regent, Nicholas Chirls, and Jonathan Wu the Williamsburg, Brooklyn-based firm writes checks between $1-2m. The firm believes the best early-stage founders are artists at heart – obsessive about new and unusual ideas, driven to bring their creations into the world, and often misunderstood for long periods. They're looking to support founders who, like artists, are focused on crafting something truly great rather than just checking boxes on a conventional startup journey. Asylum plans to back just 4-5 companies annually, offering founders both the capital and space they need to develop their vision.

The financial stack you can bank on. Trusted by 1 in 3 US startups, Brex allows you to manage your spend from MVP to IPO. Interested? Sign up here using the referral code NEWSLETTER and get 25,000 bonus points, $5K AWS credits, $2.5K OpenAI credits and up to $150K in SaaS discounts.

Don’t hesitate to reach out,🦾!