Episode summary
Peter Thiel's 27-Year Partner on the AI Bubble, the Venture Capital Crisis, and the PayPal Mafia
How I Invest With David Weisburd
· · 56 min · Hosts: David Weisburd · Guests: Jack Selby
Summary
Jack Selby argues that venture capital has become structurally distorted: too much money chased too few late-stage AI deals, while too little capital reaches the rest of the country. He says the industry has done a poor job returning capital over the last decade, mega-funds have sucked up huge sums, and the remaining capital is crowded into “shiny toy” AI rounds.
His own strategy at Copper Sky is built around the opposite bet. Selby says roughly 90% of venture capital goes to California, New York, and Massachusetts, even though many smart founders live in the other 47 states. He points to Carvana as the model: a company that was dismissed by coastal investors, then became a $65 billion public company. He argues that for most startups, Silicon Valley’s real advantage is access to money, not unique human capital.
Selby also ties the thesis to today’s AI boom, which he calls a bubble. He believes AI will let smaller teams build valuable companies outside the Bay Area, but he rejects the idea that venture must now hunt only trillion-dollar outcomes. Instead, he says the right target is a more realistic $500 million-plus outcome bought at much lower entry prices, where venture math works faster and with better odds.
Key takeaways
- Selby says venture capital has been misallocated for years, with too much money chasing late-stage AI and too little capital returning to LPs.
- He argues that the real Silicon Valley network effect is financial, not human capital, because money is concentrated there, not necessarily talent.
- Copper Sky’s first fund reportedly invested at about one-tenth of Silicon Valley Series A valuations.
- Selby says the firm’s minimum bar is a roughly $500 million outcome, not the next trillion-dollar company.
- He believes the current AI boom is a bubble and expects tens or hundreds of billions of dollars to be zeroed when it corrects.
Notable quotes
“The industry has done a poor job of returning capital to its investors over the last decade”
“any capital that is left over that is remains positively disposed towards private technology, that capital is infatuated with shiny toy late-stage AI deals”
“we could usually invest um at about between let's see, about 1/10 of the average Series A valuation of what you would see in Silicon Valley”
How the episode opens
You co-founded Clarium with Peter Thiel. You were one of the first 10 employees at PayPal. What are some lessons that you took away from there that's really driven you in your career? — Work ethic more than anything else. You're just surrounded by people that were literally working 24/7. Like you email Peter Elon at 2:00 in the morning and they respond to you within 90 seconds.
Let's talk about the state of venture capital today. Where is venture capital at in terms of an asset class?
I was essentially on the road every single week for the first 6 months of this year. And I took a very significant sample set of meetings with LPs. Here's the distillation of what I found.
The industry has done a poor job of returning capital to its investors over the last decade. And we can talk more about why that's the case. Two, the mega funds, so essentially eight firms went out and raised, I think, an aggregate of $70 billion earlier this year for whatever capital that was still positively disposed towards this asset class.
Three, any capital that is left over that is remains positively disposed towards private technology, that capital is infatuated with shiny toy late-stage AI deals. That's the entire landscape today.
So, 52% of top quartile funds end up being top quartile. We roughly 75% end up being in the top 50%, so above the median. Do you think that's going to continue to persist in this age of AI? — It doesn't directly answer your question, but
Jack, you're one of the first 10 employees at PayPal. You worked with Peter Thiel for more than 20 years. But I want to start in the PayPal days. PayPal Mafia has produced, seems like every year there there's one more additional person that that becomes impressive in the list.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture capital concentration
- ai startup valuations
- venture capital liquidity crisis
- paypal mafia and founder networks
- investing outside silicon valley
Companies and tickers mentioned
- PYPL
- EBAY
- CVNA
- Thiel Capital
- PayPal
- eBay
- Copper Sky
- Clarium Capital
- Juniper Square
- Carvana
- OpenAI
- Anthropic
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Gavin Ezekowitz on AI Valuations, Asymmetric Returns, and Why Great Investors Fail -
Anthropic at $2 Trillion? The AI Bubble, and Why the Best Startups Always Look Overvalued
How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
