A major Anthropic investor shrugs off losses

Hello. Welcome to the first edition of VC Insider! We’re excited to land in your inbox every Thursday. 

We’ve been covering venture capital for a long time, but we’ve never seen a pace of dealmaking like this, with such eye-popping valuations. Each week, we’ll make sense of the biggest stories in VC and get beyond the chatter to reveal what Silicon Valley’s sharpest minds are actually thinking, not just what they’re posting on X or LinkedIn. -Ben and Katie

This week is SF Tech Week here in San Francisco, aka Andreessen Horowitz marketing week. The free flood and drinks are flowing, and for some reason, there are two blimps floating over the Bay. 

It turns out that AI hasn’t replaced human networking…yet. Topics du jour include: Is SaaS making a comeback? Why is there so much drama between Factory AI and Cognition? How do I get into Claude Founder House?

With some 2,000 events, there is always a better one you’re hearing about around the corner. The FOMO is real. 

We’re biased, but we think the best event was our Tech Insider: Growth Mode town hall, where one of Anthropic’s biggest investors weighed in on the upcoming IPO. 

Somehow, I ended up with two sisters of famous tech founders.

My tweet this week about “Zuck’s sister” DJing in a rooftop penthouse at the FARR Summit went viral, with many people adding she does have a name of her own and is a successful VC in her own right. Sorry, Arielle Zuckerberg! (Arielle later chimed in to add she has been DJing since 2018 at Burning Man and small festivals.)

Tuesday, I interviewed Ginger Luckey Gaetz, the sister of Anduril founder Palmer Luckey, who is an advisor to the government of El Salvador. Interestingly, when I asked what company she wished she had invested in, she said it was Anduril. She said she was prohibited from investing because her husband, Matt Gaetz, was a US congressman. 

If startup investing isn’t a gamble enough for you, I’m co-hosting a poker tournament with $10,000 at stake tonight at the Foundry. I will donate any winnings to charity, so wish me luck! -Ben

Major Anthropic investor says he’s not concerned about losses or competition

Last night, Ben sat down with Menlo Ventures partner Matt Murphy, an early investor in Anthropic. If the listing goes well, Menlo will be one of the biggest winners, turning an estimated $1 billion investment into around $25 billion at a $2 trillion valuation. The firm has invested in every round since 2023.

Not surprisingly, Murphy remains extremely bullish. He shrugged off leaked financials obtained by Reuters showing Anthropic racked up an eye-watering $8 billion in operating losses last year, saying investors should wait for the company’s S-1 before judging the business. “If I could buy more, I would,” Murphy said.

He also pushed back on the idea that Chinese open-weight models are poised to commoditize the biggest AI labs. His argument is that the market has moved beyond experimentation and into optimization, with companies increasingly focused on cutting costs, post-training models, and routing work to the right system. Menlo is betting heavily on that infrastructure layer — compute, inference, routing, and optimization — which Murphy said has accounted for roughly 60% to 70% of the firm’s AI investments.

As for finding the next Anthropic, Murphy was blunt: “I don’t think there’s going to be another Anthropic.”

That doesn’t mean he sees no froth. Murphy called neo-labs and robotics “super interesting,” but warned that some startups are raising $100 million or even billion-dollar rounds before showing much real traction. 

And in a lightning round, he took a swipe at Anthropic’s biggest rival. Asked which company was most overhyped right now, Murphy didn’t hesitate: “Definitely OpenAI,” he said with a grin.

The Tech Insider audience of investors and founders was less bullish on Anthropic. When Ben asked how many people would invest in Anthropic at a $3 trillion valuation, the response was tepid, with most in the audience saying they would not buy Anthropic stock at that price. 

The head of Washington University’s endowment, in comments last month, sided more with the audience. At a conference of chief investment officers in Fort Worth, Texas, he warned that the AI labs are in major trouble because of competition from Chinese models.

"When we looked at the original OpenAI deal that some of our peers participated in and made tons of money on paper, we were highly skeptical," Wilson said. "I've gotten more skeptical over time."

Yet early OpenAI investor Vinod Khosla told Ben he strongly disagrees with Wilson, saying OpenAI and Anthropic have a huge cost advantage in chips and data centers. 

I have found that most investors remain highly bullish on American AI, particularly the largest players like Anthropic and OpenAI, but many privately voice skepticism about ballooning valuations in the broader ecosystem. -Katie 

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The Buzz

I was at Munich’s Bits & Pretzels last week, where even the robots were dressed for Oktoberfest. 

I chatted with Legora CEO Max Junestrand, who made the case for building legal AI in Stockholm. He said that European employees seem more likely to stick around, partly due to less competition but also because San Francisco has a "very mercenary culture." 

People there, he added, "go and do one year in lots of AI companies. And I think we have been able to build a culture of missionaries rather than mercenaries.” 

Still, Legora’s dual HQ is now in New York, closer to its American customers. That contrasts with Hugging Face and Listen Labs, both of which were started in the US despite their founders’ European roots. 

One investor lamented that neither business had been built locally. He wished they’d sold to European companies instead of Nvidia and Salesforce, imagining a self-sustaining ecosystem independent of America. 

But my sense is that few in Germany’s tech ecosystem share his dream. The most anticipated event at the conference? San Francisco Tech Week. -Katie

Around the Cap Table

• Katie teamed up with our sister publication, Politico, for a scoop on $100 million in compute power gifted to the White House for its Genesis Mission program for AI researchers. An additional $100 million is for public sector employees. Venture capitalist Anjney Midha’s new endeavor, National Compute, is behind the gift.
• This is not your average SPV. Get Access came out of beta last week, an invite-only program for personal investors to gain access to select later-stage rounds. Madonna’s manager and Sound Ventures cofounder Guy Oseary led an investment into the startup. 
• Why Noa Argamani, a October 7 survivor, is choosing venture capital after 246 days in Hamas captivity. 
• Ben talked to VCs putting their money into concerts as a hedge against AI. "Real life experiences are the ultimate hedge against AI," said Paul Martino, managing partner at Bullpen Capital. “The place you're going to escape from AI is a concert.”
• Henry Chandonnet wrote about doggy drama at Corgi, the $5 billion AI insurance company known for its San Francisco cafés and “Corgi girls.”
• In August, Bill Gates went public with his blunt warnings about AI. Hearing Gates talk about it on Ezra Klein’s podcast last week was much more alarming. In a testy conversation, Gates says AI “makes nuclear weapons look like nothing.”

Please let us know what you think of the newsletter and send along your tips. Email Ben or Katie anytime or contact them on Signal at benbergman.11 and kroof.26.

The VC Insider team

Ben Bergman, chief correspondent, in Los Angeles. Katie Roof, editor at large, in San Francisco. Pranav Dixit, senior technology editor, in San Francisco. Leena Rao, executive editor, in Los Angeles.

Get in touch. Email us at [email protected]