Byron Deeter, a partner at Bessemer Venture Partners, believes artificial intelligence is creating conditions where small companies can reach valuations that once required large teams and extensive resources.
The Era of Micro-Businesses
Speaking on the “20VC” podcast with venture capitalist Harry Stebbings, Deeter said he expects to see firms with around ten employees achieve billion-dollar valuations. He described this as the arrival of the “micro-business,” where technology enables growth without a proportional increase in workforce.
Executives across industries are already signaling this change, according to Deeter. Leaders are telling investors that companies can expand revenue streams without adding significant headcount. The approach comes as major technology companies including Microsoft and Meta have reduced staff this year while continuing to post strong results.
Higher Stakes for AI
Deeter described the current AI cycle as one of the most consequential periods in technology investing. He said the scale of opportunity has grown beyond earlier expectations, with the possibility of multiple trillion-dollar companies emerging. He argued that the pace of innovation is accelerating, allowing the strongest teams to advance quickly while weaker ones fall behind.
This contrasts with the atmosphere following earlier downturns, when firms spent much of their time cutting costs. Deeter said the current moment feels different, with rapid advances in AI restoring confidence among investors and entrepreneurs.
Shifting Role of Labor
One of the clearest shifts, according to Deeter, is that AI is moving into budgets once allocated to human labor. In areas such as law, medicine, and accounting, he noted that software is reducing the need for routine documentation, transcription, and summarization. He cited examples of doctors now spending more time with patients while automated systems handle records.
Deeter acknowledged that this shift could limit opportunities for younger workers entering the job market. Entry-level positions that traditionally provided training may be reduced. He compared the change to past industrial transitions, such as the impact of the Bessemer steel process and the automation of telephone switchboards, where displacement was followed by new growth in other areas.
Concentration of Capital and Valuations
Deeter also pointed to the concentration of venture funding in a few major AI firms. He said OpenAI, Anthropic, and another leading developer are together expected to raise more than one hundred billion dollars in a six-month window. Despite this, he believes there are still strong opportunities for smaller startups building around these platforms.
He added that the top one hundred private cloud and AI companies now represent more than a trillion dollars in combined valuation. While these firms remain private for now, he expects public listings to increase once market conditions improve.
Long-Term Outlook
Deeter concluded that AI is reshaping company formation, labor use, and capital allocation. He said the possibility of trillion-dollar businesses exists alongside the risk of rapid failure, making the stakes higher than in any previous cycle.
For startups, this could mean leaner teams achieving faster growth. For workers, it could mean new tools that expand productivity while altering traditional career paths.
Notes: This post was edited/created using GenAI tools. Image: DIW-Aigen.
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