The Blogs: The GenAI Paradigm Shift and What it Means for VC

There was tech before November 30, 2022. And there has been tech since November 30, 2022, evolving at an ever faster pace, gathering momentum in unexpected, exciting and sometimes alarming ways.

With the benefit of hindsight, it now seems clear that those two worlds – before ChatGPT burst into our awareness and our lives, and after – are distinct in some important ways. So much so that things make more sense if you view this in terms of a paradigm shift.

The Paradigm Shift of GenAI

A “paradigm shift” is a phrase that is often used in a light, exaggerated way to describe something that feels like a big change. GenAI, though, genuinely does have aspects that indicate it might fit the real definition.

A paradigm shift is a fundamental, revolutionary change in the basic concepts and worldview of a discipline. Think of the moment everyone stopped believing the sun revolved around the Earth and accepted that the Earth revolves around the sun – that’s a paradigm shift. A lot of people changed how they saw not just that one fact, but also themselves and the world around them, and they changed in the same ways, in the same short space of time.

GenAI has had a similar effect. Think about this:

Computing used to be for information storage, analysis, retrieval. Now suddenly, it’s for creation. Text, code, images, videos, you name it. It creates it.

Since technology is embedded deeply into so many areas of our lives, the knock-on effect is vast. For example:

How we think about ourselves in relation to technology. Rather than a tool in your hand, tech is becoming something with which you work in partnership. To get it to do things you literally talk to it.
How we think about our own professional value. GenAI can extend our reach and reduce our gruntwork, expand the questions we can ask using a greater pool of data and leave more time for other things. It reframes what you can bring to work.
What creativity means. Legally, conceptually, in relation to data, privacy, you name it, we need to rethink it.
Democratization of content creation. You can now make many kinds of content even if you don’t have advanced editing, design, or technical skills – in partnership with GenAI.
Routine or repetitive tasks. Automation has been promising to lift this burden for decades – or centuries, in a sense – but now it seems that individuals can start to shift gruntwork onto bots themselves, without needing to purchase solutions created specifically for the job. The freedom this opens up is enormous.
Hyper-personalization: Companies can now offer highly personalized customer experiences, from marketing content to product recommendations, at an unprecedented scale.

It’s not theoretical. All of this plays out in very practical real world ways. For example, think about startups clearing the first stage of growth. You can now create an MVP in a week, exceed $2 million ARR in a year, and reach Series A in 9 months – all with far fewer people. What used to represent best-in-class is now at the low end of adequate.

We used to be limited by our ability to find and process information, especially at scale. That problem isn’t entirely solved (GenAI is still plagued by mistakes and hallucinations), but there’s a sense in which the weight of the problem is shifting to one where our primary limitation is our ability to ask the right questions (and check the answers).

Why the Paradigm Shift Model Helps

Viewing GenAI as a paradigm shift is probably accurate. It’s also useful.

First, it means you don’t need to panic. Yes, things actually changed. No, you’re probably not entirely on top of things yet, but no, there’s no problem with you. You’re living through a paradigm shift. So now you have a frame of reference for when things feel uncertain; analyze it through the lens of what the new computing paradigm means for the topic you’re thinking about.

Second, it highlights which past assumptions it’s now time to update or jettison. In the VC world, that’s been, among other things, expectations for new startups, advice about marketing and go to market strategy, and a shift in the value of expertise because knowing things is suddenly a lot less interesting than understanding them and being able to leverage or get creative.

Third, it gives you a sense of what the shape of the future might look like. Not the specifics – things are changing too quickly for that, and too much is uncertain – but the contours and outlines are starting to emerge.

There are other ways it’s helpful as well, but these three particularly stand out to me because of the way they hit on present, past and future.

The Paradigm Shift and Venture Capital Investment

The paradigm shift of GenAI has changed every field in different ways. For us at Maverick Ventures Israel, it was clear that we had to be considered and thoughtful about the impact and what it meant for venture capital investment.

First, we did indeed pause and take time to reflect on this new lens and what its consequences should be. At the end of 2022 we were midway through investing Maverick Fund III – and we paused for a year. Analyzing dealflow immediately became something that had to be done with this fresh perspective. Value, growth, future expectations – everything had to take GenAI into account.

It was a process of working out which assumptions and considerations still held, which needed to be updated, and which were no longer relevant. It was also a process of evaluating not just the individual startups we saw, but the ways in which the use cases and priorities in the world they would serve had changed. Plus, of course, continually keeping an eye on the fast-evolving technology.

We concluded that rather than looking for industry disrupting startups, or ideas that would require market education, our focus should be on companies that serve the changes that are already happening, and make them easier, faster, cheaper or less intimidating.

For example:

Heqa Security. Quantum cryptography is already a serious concern, especially within communication fields. Heqa’s cost-effective, easy-to-integrate, and secure Quantum Key Distribution (QKD) solution makes this worry, and its consequences, feel much smaller and far easier to manage.
Fairgen. GenAI research needs worry-free data, and synthetic data is essential but tricky to get right. Fairgen takes care of that for companies, using synthetic data augmentation to make research accurate, accessible and easy.
Lightsolver. Energy is a headache a lot of people are having now. Reimagining the challenge with laser-based computing totally changes the equation.
Hunch. With everything speeding up, companies need instant insights into which products are working, which aren’t, and where the gaps are. Hunch provides exactly that. It’s like having a superhuman product analyst in your pocket.
Hirundo. We all know (and worry about) the issues with GenAI and data – mistakes, hallucinations, bias and so on. Hirundo’s machine unlearning solution is the answer so many companies already need. Ideal for optimization, debugging and compliance.

These companies tick the AI relevance box, the business use case box, and the emotional reassurance or worry-reduction box. Of course, they also tick the other boxes we’ve learned to look for over decades of investing, including quality of founders, grit and humility in the founding team, and a solid strategy.

It’s certainly not true to say that everything has changed because of GenAI. After all, when people accepted that the earth revolved around the sun, the sun still shone, and the earth still needed planting. But for us it was crucial to work out what had changed, and what that meant – so that we could integrate that with what we already knew, and were familiar with.

When the paradigm shifts, you need to be able to keep your balance.