15 investors lift the lid on the biggest surprises of H1 2023


The first half of 2023 hasn’t been kind to startups, but venture capital investors weren’t spared migraines either. Some VCs had a tough time of it, with their portfolio companies finding it hard to fundraise, while others dialed back their investment cadence to match the current investment climate. But what would they have done differently if they had a crystal ball? To find out, we asked 15 investors what they found to be the most unexpected trends of the year so far.

Rather unsurprisingly, the biggest surprises all seem to be related to AI in some way or the other. Several investors said while they were caught unawares by how quickly generative AI took off, the real eyebrow-raiser was VC funds going from a conservative stance to jumping in head-first into AI-related companies’ cap tables seemingly overnight.

“The No. 1 surprise has been the speed of financings and valuations in the generative AI space. Probably no surprise there. But, it really is a tale of “haves” and “have-nots” in fundraising right now,” said Matt Murphy, partner at Menlo Ventures.


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Jenny He, founder and general partner at Position Ventures, had a similar take: “I was surprised at how quickly the AI boom happened in 2023 and how many top tier firms went from a wait and see approach at the end of 2022 to becoming very active in 2023. Some of our portfolio companies went from quiet insider rounds to very hot competitive rounds at a rapid mark up at the beginning of 2023, spurred by the AI boom.”

Not all AI-related surprises were positive though. John Tough, managing partner at Energize Ventures, was baffled by how readily some firms cannibalized their climate funds to buy into AI. “We knew generalist investor interest in climate was fleeting, but it has still been surprising to see how many household names planned to launch a climate focus area and then moved along to LLMs and AI instead,” he said.

For Rajeev Dham, partner at Sapphire Ventures, this rapid increase in AI investment also brought some worries. “There’s no question that advancements in AI will spawn an incredible set of companies, disrupt industries and be the transformative technology that drives far more productivity within existing companies, but my concern is that we’re still in the very first inning, which will lead to a lot of lost capital,” he said.

It wasn’t all about AI, though. Mark Grace, an investor at M13, was surprised by the range of early-stage valuations, “Valuation ranges are all over the place, especially at the Series A stage. We all know how quiet the later stages have been, and the seed market has seemed strangely resilient. However it has been interesting to see the wide variance in Series A pricing.”

As for what investors wish they’d done differently, several felt they should have been faster on the uptake and more active than they were. “In macro environments like this one you always regret not being more active while everyone else was fearful,” said Logan Allin, managing partner and founder at Fin Capital. “These cycles only come around so often and are a boon for net-new investments in portfolios.”

Jason Lemkin, CEO and founder of SaaStr, wishes he had taken the time to meet with more founders. “I slowed down in 2022 as did many, and should have picked it up more. Multiples are still relatively low in SaaS but great companies are being formed as often as ever.”

But our favorite answer to this question by far came from Howie Diamond, managing director and general partner at Pure Ventures: “Not have personally invested in First Republic Bank stock!”

Read on for more about what investors felt were the biggest surprises and what they learned from the first half of 2023.

We spoke with:

  • Matt Murphy, partner, Menlo Ventures
  • Sheila Gulati, managing director, Tola Capital
  • Gen Tsuchikawa, CEO, Sony Ventures Corporation
  • Logan Allin, managing partner and founder, Fin Capital
  • Jason Lemkin, CEO and founder, SaaStr
  • Kaitlyn Doyle, vice president, venture, TechNexus Venture Collaborative
  • Rajeev Dham, partner, Sapphire Ventures
  • Jenny He, founder and general partner, Position Ventures
  • Oliver Keown, managing director, Intuitive Ventures
  • Rex Salisbury, founder and general partner, Cambrian Ventures
  • John Tough, managing partner, Energize Ventures
  • John Henderson, partner, AirTree
  • Christopher Day, CEO, Elevate Ventures
  • Mark Grace, investor, M13
  • Howie Diamond, managing director and general partner, Pure Ventures

Matt Murphy, partner, Menlo Ventures

We’re curious if you’ve run into any surprises in the startup investing world thus far in 2023…

The No. 1 surprise has been the speed of financings and valuations in the generative AI space. Probably no surprise there. But, it really is a tale of “haves” and “have-nots” in fundraising right now.

The No. 2 surprise is the scarcity of later-stage companies raising. It’s not that surprising, but behind the scenes, companies are still getting their houses in order, and it’s really difficult to sell right now so companies are grinding through things until they find more predictability.

No. 3 would be the amount of M&A and companies trying to be acquired. We’re only going to see that accelerate.

In hindsight, what do you wish you had done differently in the first six months of 2023?

We mobilized the entire firm around GenAI and it paid off. We’ve got a strong portfolio and continue to invest. We’ve even got a handful of investors who are attending hackathons and coding in their free time. I only wish we’d started building that pipeline more purposefully in 2022. So many of these businesses are being started by founders leaving companies with pockets of AI talent, so you really need to be focused upstream on founders before there is even a full twinkle in the eye. We have been doing a great job of this so far, and really doubled down on Menlo’s Future Founders program this year.

Sheila Gulati, managing director, Tola Capital

We’re curious if you’ve run into any surprises in the startup investing world thus far in 2023…

Startup investing in 2023 has been defined by difficult macroeconomic headwinds on one hand, and accelerating AI tailwinds on the other. The dichotomy has created a startup investing environment of haves and have-nots that has been quite interesting, and, to some extent, surprising.

I’m surprised that the AI conversation is not centered more on the potential of AI for Good. There are intractable problems that society has yet to solve where AI could offer a breakthrough. Technology has a history of presenting these types of breakthroughs and thus has been a harbinger of optimism.

AI is no different, and I see education as a prime example of where AI could offer every child individualized instruction that addresses their style of learning, pacing needs, and adaptive modalities. This could advance education practices for all learners and provide the inalienable right to education for all offered by a good society.

I’m obsessed with thinking through these types of scenarios and working on them, as AI will offer many breakthroughs for the world.

In hindsight, what do you wish you had done differently in the first six months of 2023?

While we spent time on it, we wish we had spent even more time with academics and researchers at top-tier institutions focused on AI. We believe a good subset of the AI generation’s decacorns will originate from deep technical research, much of which is in academic research labs today.

Gen Tsuchikawa, CEO, Sony Ventures

We’re curious if you’ve run into any surprises in the startup investing world thus far in 2023…



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