Elad Gil of Gil Capital, Gil & Co. & Enigma Global

1. Key Themes

The Massive AI Wave is Both Overhyped and Underhyped Simultaneously

Elad argues that AI represents a fundamental transformation where valuations are actually justified by fundamentals. "If you look at Azure earnings a quarter or two ago, they did, I think it was like 28 billion in revenue-ish and 10 to 15% of that was AI. So it's a few billion dollars a quarter on Azure alone for AI spend. That's enormous... So real money is being spent on AI today and there's very little actual impact which to me means there's even more room to go." - Elad Gil

He adds: "It's underhyped because it's such a massive wave of transformation... And then the average company is probably overhyped back to this point of 2000 IPOs and like a dozen relevant companies, right? Definitely most startups are going to fail." - Elad Gil

The Internet Bubble Parallel: Most AI Companies Will Fail

Elad researched the 1990s dot-com era to understand the current AI moment. "Do you know how many companies went public in 99? It was close, 450. And then if you look at the first part of 2000, another 450 or so companies went public... There's probably two or three companies that are highly relevant, very important, Amazon, and the like. And then there's probably a dozen companies that are still around that are important enough or important-ish. And then the other 1,980 companies all died or got bought." - Elad Gil

He warns: "90% of people are going to be in something that doesn't work... the question is, can you actually tell what is good and what isn't and what's durable versus not?" - Elad Gil

Forever Private Companies Are Emerging as a New Category

Elad identifies a structural shift where certain marquee companies may never go public. "I think one interesting shift that's happened is there may be a subset of companies that are forever private because it can afford to be. That may be Stripe, that may be SpaceX, that may be some other companies." - Elad Gil

However, he's skeptical this will be widespread: "I don't know if you remember the direct listing wave of like 2020 or whenever all these companies started doing DLs and it was considered the next big thing and then like five companies did it. I think it's quite possible that this forever private thing will be similar." - Elad Gil

2. Contrarian Perspectives

Go for the Easy Thing First, Not the Hard Thing

Elad advocates for picking low-hanging fruit rather than tackling the hardest problems initially. "One of my pieces of advice to founders is often who are doing really hard things right now. And I'm like, why are you doing the really hard thing? Just go do the dumb, easy thing that you think is undefensible and build defensibility because of the really hard, complex thing is something you should do in three, four years when you've run out of the easy stuff... it's almost like you're going for a walk and there's a giant mountain and there's a nice little path around it. And you're like, I'm going to go up the mountain. And you're like, well, you know, just take the nice path." - Elad Gil

Restricting M&A Hurts the Startup Ecosystem

Counter to popular sentiment about big tech acquisitions, Elad believes curtailing M&A is negative. "One thing the prior administration has done which this administration is to some extent continuing is effectively curtailing some of the M&A activity you'd normally see big tech participating in. And I actually think that's a negative for the startup ecosystem. I think it's good for companies to be able to exit. I think we're going through a massive sea change right now technologically. A lot of things are being innovative on that won't necessarily sustain on their own and actually having larger partners will help a lot for them." - Elad Gil

Nuclear Energy Is Safe But Society Chose to Reject It

Elad presents data challenging the conventional narrative on nuclear safety. "If you read that [Wikipedia] page, you basically see that a lot of the direct evidence on deaths from nuclear are very small... most of the deaths from nuclear that are clearly provably traced back to the nuclear accident are either Russian submarines in the 80s... And then radiology lab accidents where they misdose people. And if you compare that to stats of people dying installing solar by falling off of roofs, more people per year die from solar installs." - Elad Gil

He notes: "Public opinion on nuclear flipped in the mid 70s... It went from something everybody was for to something many people were against. And that was probably a mixture of the environmental lobby and big oil, effectively wanting to kill the industry." - Elad Gil

Most Competitive Conflicts Don't Actually Materialize

Against conventional wisdom about competitive conflicts in venture portfolios, Elad found the opposite. "I'd say 90% of the time, founders think that they're going to compete and they don't. They tend to go in very different directions, especially if it's early stage companies. And then maybe a few percent of the time, things actually converge. And sometimes they actually converge in the companies that you don't expect." - Elad Gil

Example: "I was an investor in Square and the Stripe founders pinged me and asked if I wanted to invest... I pinged one of the key executives at Square and said, hey, do you think this is a conflict? And he said, absolutely... Then I texted Jack and I'm like, hey, is this a conflict? He was like, no, go ahead... And then in hindsight, they didn't really end up competing." - Elad Gil

Founders Should Think Seriously About Selling

Counter to the "never sell" startup mythology, Elad is pragmatic. "If you want to sell your company, you know, you probably should sell your company... there's a handful of companies that should never sell or should never have sold... But if you're in one of those companies, you should never sell. You should keep going. And then most other companies probably should sell. They should just figure out the right price because most companies just don't get that big. And most companies fail." - Elad Gil

3. Companies Identified

Stripe

Description: Online payment processing platform Quotes: "When I funded Stripe, everybody thought, why would you fund Stripe? Braintree already does it. Literally, that's what people would say. And then Braintree eventually got bought by PayPal for, I think it was 800 million. And Stripe is now a $100 billion market cap company... I've never sold a share of Stripe and I hope to never do so." - Elad Gil

Perplexity

Description: AI search company (early AI investment) Quotes: "I played with GPT-2 and then GPT-3 and it was a huge step function up. And all the scaling papers were out and you could just read them and see that all the stuff was coming. And so I just started looking for people working in the area. And so that's when I funded perplexity and Harvey and eventually Decagon and Abridge and a bunch of other companies." - Elad Gil

Harvey

Description: AI legal technology company Quotes: Listed among Elad's early AI investments: "that's when I funded perplexity and Harvey and eventually Decagon and Abridge" - Elad Gil

Decagon

Description: AI customer service company Quotes: Listed among Elad's early AI investments from 2021-2022 period - Elad Gil

SpaceX

Description: Space exploration and rocket company Quotes: Listed as potential "forever private" company alongside Stripe - Elad Gil

Coinbase

Description: Cryptocurrency exchange Quotes: "In 2016, 2017, I just started doing a lot of crypto investing because it was such a clear sea change. And I wish I'd obviously started earlier. But that's when I invested in Coinbase and other companies in that area." - Elad Gil

Airbnb, Figma, Instacart, Notion

Description: Various successful tech companies Quotes: "There's a lot of companies I invested in simply because I met the founders and I thought it was a really great company. You know, that was Airbnb and that was Stripe and that was Figma and that was Instacart and, you know, Notion..." - Elad Gil

Square, Affirm, Brex

Description: Fintech companies Quotes: