Elad's bad week - and Implications...
It has been a busy week for Elad Gil.
First, Perplexity, his darling investment, blew up on X when numerous stories came out that the company was giving away their priced version for free, and many of those users subsequently switched to something else.
Then, on Friday, another one of Elad’s premium investments, Cognition Labs (aka Devin), made a major splash, when a well known AI influencer published his comprehensive test - showing that Devin’s accuracy is less than 20%.
Not even a day passed since the publication, but X blew up with comments - some outright calling the founder, Scott, “fraud”.
Of course, loyal readers of this newsletter will remember our warning back in April of 2024, but alas, Cognition’s VCs doubled down. Oh well!
Implications
If this post feels like it is about Elad, it is not. Everyone makes mistakes. And a Solo VC with a billion AUM is likely to make more mistakes than most.
The real implications is that now there are at least two companies out there with tons of capital to spend, and no clear way of getting out of this mess.
And when internal efforts fail, companies inevitably start to look elsewhere - via M&A.
How many such over-funded firms out there in the AI space? Many!
This leads to only one possible conclusion: 2025 is going to be a great year for M&A. Companies will either be bought or they will be doing the buying.
Companies will either be bought or they will be doing the buying.
In the case of Elad’s two companies, it might actually be both. Time will tell. For now, the two CEOs (Scott and Aravind) clearly diverge. Aravind, rightly or wrongly, is claiming to be a buyer:
And Scott is either warming up to Microsoft, or just should not be Cognition’s CEO to begin with.
Because one thing is clear about 2025, things are about to accelerate, so if you’re an AI company, and you don’t know whether you’re in the buying business, or the selling business, then you probably have no business being the CEO.
-SG