'In 2019, venture capitalist Vinod Khosla invested $50 million in OpenAI, twice the biggest initial investment he had ever made. It was a year before OpenAI released GPT-3, the generative AI model that provided the foundation for the conversational ChatGPT app in 2022. And Khosla had begun the investment process in 2018, at a time when he judged that the performance of AI-based products like virtual assistants could be poor, even laughable, relative to humans.
Yet he invested in OpenAI anyway. I wondered how he knew.
“It was the rate of change,” Khosla told me when I asked.
He didn’t mean rapid revenue growth, the kind of change that startups often use to impress investors. Earliest-stage investors by definition must act before revenue ramps up.
Predicting technology’s trajectory
No, Khosla had been struck in 2018 by the magnitude of talent going into AI, for one thing, and by its overall progress. He was particularly impressed by developments at Google parent Alphabet, which had spun out its Waymo autonomous vehicle unit in 2016, and by Alphabet’s DeepMind, which had developed AlphaFold 1, a breakthrough in predicting protein structure. China’s Baidu was also displaying progress in its AI efforts, like its autonomous driving system Apollo.
As a venture capitalist, however, he couldn’t invest in large public companies, and he wasn’t investing in China. OpenAI struck him as the best option in the field, given its technological trajectory and its ability to attract top-notch engineers.
He didn’t focus simply on how OpenAI’s models performed at that moment. Instead, he looked at the rates of advance within OpenAI as well as those in the broader world of AI.
“You can predict the direction of technology and what is scalable, with 60% to 70% accuracy,” says Khosla, who is also a co-founder of Sun Microsystems.'
'In 2019, venture capitalist Vinod Khosla invested $50 million in OpenAI, twice the biggest initial investment he had ever made. It was a year before OpenAI released GPT-3, the generative AI model that provided the foundation for the conversational ChatGPT app in 2022. And Khosla had begun the investment process in 2018, at a time when he judged that the performance of AI-based products like virtual assistants could be poor, even laughable, relative to humans.
Yet he invested in OpenAI anyway. I wondered how he knew.
“It was the rate of change,” Khosla told me when I asked.
He didn’t mean rapid revenue growth, the kind of change that startups often use to impress investors. Earliest-stage investors by definition must act before revenue ramps up.
Predicting technology’s trajectory
No, Khosla had been struck in 2018 by the magnitude of talent going into AI, for one thing, and by its overall progress. He was particularly impressed by developments at Google parent Alphabet, which had spun out its Waymo autonomous vehicle unit in 2016, and by Alphabet’s DeepMind, which had developed AlphaFold 1, a breakthrough in predicting protein structure. China’s Baidu was also displaying progress in its AI efforts, like its autonomous driving system Apollo.
As a venture capitalist, however, he couldn’t invest in large public companies, and he wasn’t investing in China. OpenAI struck him as the best option in the field, given its technological trajectory and its ability to attract top-notch engineers.
He didn’t focus simply on how OpenAI’s models performed at that moment. Instead, he looked at the rates of advance within OpenAI as well as those in the broader world of AI.
“You can predict the direction of technology and what is scalable, with 60% to 70% accuracy,” says Khosla, who is also a co-founder of Sun Microsystems.'