Thank you for reading this week. We have seen a 300% growth in readership in the past two weeks. We are are well on the way to being one of the most thoughtful communities about the future of AI.

This week, I was particularly struck by a Chinese quant fund that backed into building an LLM. The $8bn fund uses artificial intelligence and algorithms to detect patterns affecting stock prices and has created a powerful AI model, DeepSeek-V2 com This model can answer questions, write code, and reason and is priced competitively at about 2Rmb per million output tokens. While most commentators pointed to China’s prowess in LLM creation (which is undoubtedly true), I think it was more fascinating to see rivals Alibaba cut usage prices for some of its models by as much as 97 percent. Baidu also made two of its Ernie models free.

This underscores the competitive nature of LLM creation and the lack of a moat for large language model providers. We have seen that even with an exponential increase in training, we don’t get markedly better results, leading users to optimize model usage based on compute and cost.

This leads to the second topic I am researching this week: consumption-based pricing. As everyone moves to more consumption-based pricing, I wonder how this will affect revenue management and projections. I am sure that AWS and others have built their own tools, but as more SaaS companies come online with consumption-based pricing, I think there is an opportunity here. Please reach out if you are working on this problem, know someone working on it, or know of a company to look at. I will work on a more in-depth post on the subject in the coming weeks.

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News I Have Been Reading

Tech News

• The NVCA updated its model documents in light of recent litigation. For VCs, it is important to note that this is in light of West Palm Beach Firefighters' Pension Fund v. Moelis & Company. In that case, the court found that Moelis had improperly constrained the board when the company entered into a shareholder agreement with the founder that gave him rights over the board composition and management. the court further noted in dicta that the board could have issued a single share of preferred stock to the founder, with the underlying preferred stock delegation containing the contested limitations on board authority. The restrictions would then have been valid under Section 141(a) of the DGCL as such delegation would be deemed a part of the corporation’s certificate of incorporation. Lesson: Avoid using an outside shareholder’s agreement to constrain board actions. 

• Wells Fargo is losing its lunch supporting Bilt. Read here in the WSJ.

• Does AI spell the of the Big 4? This VC thinks so.

• That’s it for this week. The podcast will soon have major updates and really interesting guests. Stay tuned!