AI: A First-Principles Approach

At BAT VC, we believe the next wave of innovation will not be built with AI, but on an AI-first foundation. This conviction is the cornerstone of our investment thesis: to empower visionary founders who are leveraging AI to build scalable, defensible, and differentiated products.

The current AI landscape is moving beyond the initial "Big Bang" of 2023 and into a new phase: a "First Light" era of forming foundational companies. While the industry is grappling with the paradox of "stumbling" agents and high project failure rates, we are focused on the long-term vision. This is our unique approach, grounded in a deep understanding of the market and the technologies that will define it.

From Hype to Reality: The Evolution of AI-First Investing

The AI landscape is rapidly evolving, moving past simple copilots and chatbots to a new era of specialized, agentic AI. As a firm, we are tracking three critical trends:

1. Verticalized AI as the New Core: We are witnessing the shift from horizontal, general-purpose models to highly specialized, vertical AI applications. These aren't just tools; they are autonomous agents transforming entire professions, from coding to research. This is where the real value is created, as founders build proprietary data moats and deep integrations that solve industry-specific problems.
2. The Acceleration of AI Research: The most profound trend is AI's ability to accelerate its own development. We are entering a "twin arms race" where AI models assist in creating even more powerful AI. This feedback loop of rapid progress—driven by breakthroughs like neuralese recurrence and AI self-improvement techniques—will lead to a future where innovation happens at an unprecedented pace. We are also seeing the emergence of the browser as the dominant interface for these AI agents, and a clear path toward a future defined by generative video and other new media.
3. The Human-AI Co-Manager: The future of work is not about AI replacing jobs, but about creating symbiotic human-AI teams. The most successful founders are those who recognize that the human role will evolve from task execution to managing, overseeing, and debugging a team of AI assistants. The ability to effectively "co-manage" AI will become a new, essential leadership skill.

Navigating the Paradox: Our Thesis in Practice

Recent reports—such as a Bessemer Venture Partners study and an MIT NANDA initiative report in Fortune—have highlighted a critical paradox: 95% of generative AI pilots at companies are failing to deliver a measurable impact on their P&L. This data does not cause us concern; it is a necessary filter for a maturing market. This paradox validates our AI-first approach by separating genuine innovation from superficial applications.

• Building a "Shooting Star," Not a "Supernova": The BVP report distinguishes between explosive but low-margin "Supernovas" and capital-efficient "Shooting Stars" with solid gross margins and strong product-market fit. The high failure rate of AI pilots proves that simply "wrapping" an open-source model with a new UI is not a viable business model. We partner with founders who are building the "Shooting Stars" of the AI world: robust, transparent, and debuggable agents that provide clear "chains of thought" to their human counterparts, turning every failure point into a learning opportunity.
• Flawed Integration, Not Flawed AI: The MIT research confirms our core belief: the failure lies not in the quality of the AI models themselves, but in flawed enterprise integration. Generic tools like ChatGPT, while powerful for individuals, fail to adapt to complex company workflows. This underscores our focus on investing in specialized, purpose-built AI solutions that are designed to integrate deeply and drive tangible back-office automation, where the ROI is highest.
• The Moat is the Product: This paradox underscores the need for defensible moats. We invest in teams with a deep understanding of their unique enterprise integrations and proprietary data. This is what truly builds value—a product so deeply embedded in a workflow that it becomes indispensable.

In short, the current market dynamics validate our conviction. The future of AI is not in the fully autonomous but in the intelligent symbiosis between powerful systems and the human innovators who guide them. This is the future we are building, and it's why our AI-first thesis is uniquely positioned for success.