TechCrunch StrictlyVC evening in Los Angeles brought together two straight-talking AI investors: Carter Reum, co-founder of M13 with $2.5 billion in AUM, and Chang Xu, a partner at Basis Set Ventures, an early-stage AI fund now investing out of its fourth fund with nearly $1 billion in AUM.
On stage in El Segundo, they tackled how to pricing deals in a market that has never moved this fast, how to find companies that will not get steamrolled by the hyperscalers, and what the SpaceX IPO might mean for LA.
On whether there is an AI infrastructure bubble, Xu called it a paradox. ChatGPT went from zero to $40 billion in revenue in six months. A portfolio company went from $1 million to $10 million ARR in year one and $10 million to $70 million in year while staying cash-flow positive with just 20 people. But if you price every deal to that math, it does not work out for a portfolio.
Reum compared this cycle to previous ones: cloud, the iPhone, even the car in the 1920s. What is different now is that innovators are competing not just with each other but with the ten largest tech companies on the planet. For the first time in history, the incumbents actually have the advantage: the tech, the capital, the data, the talent.
On avoiding hyperscaler competition, Reum said they focus on regulated industries as a moat. They had a near-billion-dollar exit in a company disrupting 911 call centers with AI. Healthcare is another area where regulation slows down the big players.
Xu described their framework as investing below the AI and above the AI. Below the AI, infrastructure like databases and deployment tools is being rethought for agents rather than humans. Above the AI, in crowded markets, they look for defensible technical differentiation and long-term moats.
