Sound Ventures has already invested half of its newly formed $240 million AI fund in three companies

Sound Ventures, an eight-year-old Beverly Hills, Calif.-based venture led by general partners Ashton Kutcher, Guy Oseary, and Effie Epstein, just last week launched a new $240 million AI announced the establishment of a fund.

It turns out that half of that has already been invested in the three companies OpenAI, Anthropic and Stability.AI that were announced at the time of the fund’s rollout.

In addition, Epstein said the team plans to invest in just six companies in total and has not set aside funding for subsequent rounds, and in the case of this fund, backing rivals would be a deterrent. It is said that it will not become

While this strategy runs counter to traditional venture investment philosophies, the highly concentrated nature of the AI ​​fund makes it difficult for sound companies because of the technical talent needed and the technical talent needed.・It reflects how Ventures expects a small number of major players to emerge in a world remade by AI. Capital required to cover computing costs. (OpenAI CEO Sam Altman previously referred to these things as “Watery eye. ”)

We spoke with Epstein earlier today about a new high-risk, potentially high-reward strategy for Sound, which has separately invested in an early-stage fund that closed in 2021. Our chat below has been lightly edited for length.

Effie, last week you thought a handful of players would emerge as winners here considering the talent and capital needed to support these foundational model tiers that Sound Ventures is interested in. I saw you say yes. You have already invested in three of these companies: OpenAI, Anthropic and Stability.AI. Are you going to pour more money into these companies when they raise their next round of funding? How concentrated will the AI ​​fund be?

The fund will therefore have a very concentrated portfolio, concentrating on 6-7 positions.

it’s wild. So is half the money already gone?

That’s probably a safe guess. We know he has already invested in three companies, and I won’t disclose how much he’s invested in each, but if you do the math, that’s about six positions, three of which he’s already closed. , so this is fairly accurate.

Which company has raised the most capital? Open AI?

I’m not going to reveal the amounts for each company, but from a fundraising standpoint, I can tell you that this fund came together quickly. [thanks to the] The work we have done over the past 15+ years [including when Kutcher and Oseary were investing their personal funds as angel investors].Especially when thinking about OpenAI, Ashton and Sam [Altman] We’ve known each other for over ten years. That’s why we’ve built great relationships with great founders. . and accumulated achievements. That’s why, when you look at these companies, in very competitive rounds, we were able to get pretty big quotas.

Anthropic’s team has previously worked at OpenAI and will eventually try to compete with OpenAI. Was there any backlash to your approach?

What’s really interesting about this ecosystem is that the founders recognize that they are all on a similar mission. Of course, it’s a competitive market. Companies are fighting for talent, but ultimately it comes down to whether we sound can support them from a branding and marketing standpoint, from a narrative standpoint. [and to share] What’s happening broadly within AI, it’s something that benefits the entire ecosystem, and that’s why the founders were really supportive. This is possible only with the blessing of the founder.

What information rights do you obtain from these companies?

Again, the most important thing is to work with the founders to do this.We have invested in over 200 companies [since Kutcher and Oseary began investing in startups, including Uber, Airbnb, and Spotify]. In the past, we have also invested in competitors, and that was based on opt-in from both founders. And ultimately, our track record of supporting founders is why we are able to attract great founders to our sound.

Has Sound spoken with Elon Musk about what they want to create? If it does, are you likely to support the company?

Honestly, it’s not something I can comment on at this point. He’s not part of the portfolio.

have understood. But you clearly know he’s trying to make his OpenAI rival.

In general, we know there are many players out there. That’s what we venture investors do. We need to understand what the market conditions are like. [In fact] We have been investing in AI for 10 years. In fact, we made his first bet in the field of artificial general intelligence in 2007.We invested in Vicarious [the robotics and AI company acquired last year by Alphabet] So we were in and out of the industry for a while and got to know some of the major players. That’s why this strategy came together so quickly.

Admittedly, I appreciate this bet that network effects are at work here. In a related vein, Chegg received a lot of attention last week after its stock price plummeted after it admitted how disruptive OpenAI’s chatbot, ChatGPT, was wreaking havoc on its business. Chegg is also a Sound portfolio company. How does your company protect itself?

We have reached out to a number of companies to understand and explore how they can leverage this type of technology internally. We believe every company, regardless of industry, sector, or problem they are trying to solve, should find a way to make this part of their offerings.i think i can’t believe [Chegg CEO] group [Rosensweig] That was his announcement of the partnership with OpenAI just weeks before the earnings announcement.

How are you using AI within Sound Ventures?

We use this primarily for talent sourcing and to understand where talent is going. We are so obsessed with talent.

Are you running other funds in parallel during that time?

yes. We are deploying her two strategies in parallel. Here we have a growth strategy dedicated to the basic model.And in parallel we [third, $200 million] early stage fund. It is typically used to fund Series A and B software companies. As it relates to AI, it means funding the application layer that sits above the model. This is an area that we are very actively working on and investigating in depth.