On the most recent episode of the [Financial Samurai podcast](https://www.financialsamurai.com/itunes), I had a conversation with Ben Miller, cofounder and CEO of [Fundrise](https://www.financialsamurai.com/fundrise), exploring the realms of artificial intelligence, venture capital, and the key elements to access the best private company opportunities.
This summer, Ben was in San Francisco visiting various portfolio companies and seeking new investment opportunities. We also met for lunch in Cole Valley.
Having invested over $350,000 in [Fundrise Venture](https://www.financialsamurai.com/innovation) across three accounts, I was excited to discuss with Ben his insights on the AI and private company landscape. Given that Fundrise has been a longtime sponsor of Financial Samurai, I am fortunate to have regular one-on-one discussions with him. When significant capital is involved, it’s prudent to perform due diligence directly with the decision-maker.
I firmly believe that AI is on the verge of being the next substantial investment growth trend over the ensuing decade. Since I won’t be joining a rapidly expanding AI startup, I aim to maximize my exposure in this area as much as possible. My private AI investments span from Series Seed to later stages (Series E and beyond), and I also own shares in all of the Magnificent 7 companies.
## The State of AI: Multiple Winners Accelerating
We kicked off our discussion with the growth trajectory of AI. The major players—such as Anthropic—are not just growing; they are experiencing accelerated revenue increases.
I proposed the notion that AI could eventually become commoditized. Ben disagreed, asserting that the leaders continue to distinguish themselves, gaining a competitive edge with superior products, enhanced talent, and stronger protective barriers.
It appears that with the significant capital expenditure in AI, the market is large enough to support multiple successful players.
## Venture Fund Concentration and the Power of Big Bets
We delved into the necessary level of concentration within a venture fund. Regulations indicate that 50% of the fund should be distributed across at least two companies; however, within that structure, a fund can still make very focused investments.
At present, around half of the [Fundrise Innovation Fund](https://www.financialsamurai.com/innovation) is allocated to only three companies: OpenAI, Anthropic, and Databricks. This level of concentration involves higher risk, but selecting the right options in a transformative area like AI can yield massive rewards.
As the renowned hedge fund investor Stanley Drukenmiller once remarked, “If you look at all the great investors that are as different as Warren Buffett, Carl Icahn, Ken Lagoon, they tend to take very, very concentrated bets. They see something, they see it, and they bet the ranch on it. The mistake I’d say 98% of money managers and individuals make is they feel like they’ve got to be involved in a variety of options. And if you truly believe in something, concentrate your investments and then manage your portfolio closely.”
We exchanged thoughts on the anticipated evolution of the Innovation Fund’s holdings moving forward, the timelines for holding these investments, and strategies for identifying future winners. The Innovation Fund also includes investments in Canva, Vanta, dbt Labs, Ramp, Anyscale, Inspectify, and additional companies.
## Rethinking Valuation: Growth-Adjusted Metrics
Next, we tackled the topic of valuation. Ben presented the **Growth-Adjusted Revenue Multiple** as a more appropriate measure for evaluating fast-expanding companies—similar to the price/earnings-to-growth (PEG) ratio for publicly traded stocks.
If we truly find ourselves in the early stages of AI, it makes more sense to assess companies based on both their revenue growth and scale, rather than relying solely on traditional metrics.
It appears that investors may be underplaying the rapid growth of AI, related to a conversation Ben had with an investment banker at Goldman Sachs, who suggested forecasting a 30% growth rate instead.
We also briefly discussed the [Baumol Effect](https://acjsissons.medium.com/the-baumol-effect-not-a-disease-but-a-cure-c63d0ae0b481)—the phenomenon where increasing labor costs in low-productivity industries can accelerate the adoption of technology. In essence, when wages increase faster than productivity, businesses are incentivized to adopt AI to bridge that gap.
## Competing for the Best Private Growth Deals
From there, we transitioned to one of the most challenging aspects of investing: access. In my opinion, attempting to [secure a meaningful IPO allocation](https://www.financialsamurai.com/the-futility-of-chasing-a-hot-ipo-and-what-to-do-instead/) in a hot deal is ultimately futile. I prefer to invest in promising companies prior to their public offerings.
Using the Figma IPO as a case study, Ben demonstrated just how challenging it is to obtain a significant allocation—even for well-connected investors. Figma was