The conversations around AI and sustainability have centered around two fronts, according to Lorenzo Thione, a managing director at Gaingels.
On the one hand, AI’s capabilities have grown rapidly, giving rise to new products and technologies that require enormous amounts of computational power and resources. That’s not quite sustainable.
On the other hand, these advancements in AI and machine learning tech have widened the avenue for creating more architectures to sustain AI development. That, per Thione, is going to herald innovation.
Thione, like everyone these days, has lots of things to say about AI. However, he’s been in the game much longer than most people, having sold his AI-web company, Powerset, to Microsoft in 2009. Then he became an investor and has since become known for his work with Gaingels, a venture capital syndicate where he leads the AI and sustainability investments.
The syndicate, which has nearly $750 million deployed, focuses on backing founders who identify as part of the LGBTQ+ community. As a gay man, Thione remembers a time when founders used to be nervous about being open and out with investors, or worried about how they presented themselves. “They simply were not getting any access to the venture engine because of who they were,” he told TechCrunch+.
Thione and others have worked hard to change that narrative, and the venture industry is finally showing signs of entering a new era. Earlier this month, Crunchbase said it would begin tracking the number of venture dollars allocated to LGBTQ+ founders, which is estimated to stand at 1%.
Thione hailed Crunchbase’s move as a step toward tangible equity. “We cannot begin to fix what we do not measure,” he told TechCrunch+. “This could be the catalyst we need, fostering more diverse and successful LGBTQIA+ startups, thereby enriching our entrepreneurial ecosystem in its entirety.”
AI is certainly an area that could use more enrichment. Thione predicts there will be a slew of companies using AI to tackle energy consumption and distribution of power resources. “There are going to be a number of AI companies positioning themselves as ‘Hey, we are an AI company, but we’re actually using it here to solve a problem that’s going to have a positive impact on the climate.’”
TechCrunch+ recently caught up with Thione to talk about his journey in venture, the future of AI, artificial intelligence and how Gaingels has dealt with the investor pullback.
(Editor’s note: This interview has been edited for length and clarity.)
Regarding AI, there are two schools of thought: That it will save us all or destroy us. Where do you stand and why?
It’s incredibly unlikely that AI will destroy humankind. I’m much more in the optimistic camp. Technology certainly has exacerbated some issues when it comes to certain types of inequalities within modern societies, but it has largely made things better. People aren’t wrong to point out the ways things can go wrong with AI.
Clearly understanding the capability of AI systems as we build them will make those issues less relevant. We are going to see problems emerge, not so much even by “AI going rogue,” but rather just the side effects of the positive uses of AI. Those are going to have some externalities that are not positive. There will be misuse as we see AI systems go out and open source growing as a movement.
It’s inevitable that people are going to have different intentions, and some of them are going to be bad actors trying to use AI for nefarious impact. There are all of these problems, like misinformation, deep fakes, the ability to create hundreds of millions of bots, creating a distributed denial of services attack that is harder to detect, copyright, plagiarism and lack of attributions. All of these are problems that we’re going to need to contend with as a society.
AI itself is going to be the weapon to use against all this. I’m very interested in investing in companies that are effectively using AI to build adversarial systems that detect and combat the sort of misuse or side effects of the proliferation of negative externalities of AI. Anything from deep-fake detection and bot detection to being able to create sourcing and attribution for copyrighted material. It’s a bit of an arms race, but I believe we will continue to find ways to use these technologies to make things better not create doomsday for humanity.
You mentioned that this was somewhat of an arms race. How do you see this race to be a leader in AI panning out?
There’s going to be an arms race between good actors and bad actors. There are also going to be some justified layers of regulation around the capabilities of AI systems and their ability to take certain actions in the real world. For example, connecting AI systems to banking systems will require a certain amount of regulation. There are probably going to be compacts and treaties to prevent AI from being connected to weapons systems. That’s, again, looking at the most serious consequences that either misused or rogue AI could have in society.
When you talk about the space race, we usually address geopolitical forces and the contrast between nations wanting to establish dominance from a technical and socio-political standpoint. It’s actually a little less likely to see that with the most powerful type of AI today unless we get to a point where AI systems are deeply understood, manipulated and controlled in its internal processes. Of course, that could be good, but it could also be bad from the standpoint of censorship and population control.
There are definitely going to be some elements of an arms race between companies, especially when it comes to high-value sort of applications like finance, where most of the problems are going to be felt initially.
We need to be ready for AI-powered cyberattacks and AI-powered sorts of cybercriminals. That’s where there are going to be a lot of opportunities for investment.
Is the interest in AI here to stay or do you think people will move on to something else in a few years, like they did with crypto?
There’s definitely the possibility of Black Swan events, right? Something may happen that shows the intrinsic limits or ceiling of the current approach to AI, or the negative outcome that comes from the use of AI technologies. Or, there might be other options for the continued development of those technologies that could put a big hamper on investment and investors’ optimism around AI. But it will intrinsically be a Black Swan event, which means it’s going to have a finite but small possibility of occurring.
It’s hard to predict and know if and when this might happen. Right now, the exuberance is not motivated only by FOMO or herd mentality. Each individual investor, at least the most disciplined, can chart a path from technology to product, service and value, and effectively generate wealth and value for the companies that control those technologies.
But we’re not yet at a point where we see the impact of AI as growing the GDP pie by such a percentage that companies are regularly going public at $10 billion to $30 billion valuations. Once we actually see that happen, then the type of valuations that we’re seeing today may be more justified.
That said, the actual valuations that we’re seeing today are driven by a lot of hurt and FOMO. A lot of the capital is sitting there because [investors] have been afraid of deploying it in other sectors, and effectively it is all piling up into one subsegment of the economy.
Many investors drew back this past year as the downturn continued, but you say Gaingels is set on increasing its footprint. Why?
It’s a tricky way of looking at investors’ activity. We invest in a lot of companies because there are a lot of really cool companies being created.
We make a lot of investments because we think we have the ability to have a direct impact on the ecosystem. However, the amount of capital that we’ve deployed has shrunk or pulled back in a similar way to the overall market. Because we are nontraditional investors, our flexibility and our ability to make smaller or larger bets allows us to continue to invest in a lot of companies — just less capital. More traditional funds have portfolio-return dynamics, where they need to invest a certain percentage of the capital. If they have less capital they want to put to work, they’re going to invest in fewer companies.
That said, we’re very excited that we can continue to have growth in the number of companies we’re investors in and the companies we have an impact in. It increases the chances that some or many of those will go on to be generational companies.
As we know, many of the great companies of the world have been created in moments of downturn, but it’s also important for [the LGBTQ companies in which we invest] because it increases our ability to help many more companies with the tools, resources and support to build inclusive, participatory, representative communities within the venture ecosystem.
As an openly gay investor, how has your journey to make a change in venture been so far?
After I sold my first company, I observed and interacted with a number of fellow founders who, from about 2005 through 2009, felt like they couldn’t be out with their investors or their boards. They simply were not getting any access to the venture engine because of who they were, how they presented, where they came from, how they identified and whatnot.
That became apparent to me as a problem of a lack of access and inclusivity in the venture ecosystem, as it was already for women, people of color and other underrepresented groups. But there was nothing that was supporting and creating a structure for people in the entrepreneurial world and members of the LGBTQ community.
I co-founded a nonprofit organization called StartOut in 2008, which has continued to grow and become a national nonprofit that supports and works to increase the number and the diversity of LGBTQ founders and entrepreneurs in high-growth startups.
We created Gaingels because there was just one thing that StartOut couldn’t do: effectively invest capital directly and facilitate the investment from the community into the community. In fact, Gaingels was originally just a small angel group of LGBT investors investing in LGBT founders. We did that for a number of years, then we broadened the scope.
The model for us was 2018. It was a very stark realization that things were improving much slower than we would have liked, even though they were improving. Even now, things aren’t moving as fast as we would like, but we felt there was limited impact any single organization could have if you’re focusing on too narrow a piece of the ecosystem. So we decided we would broaden the number of companies and the type of companies we would invest in, provided that we were aligned with that company.
We’ve been spearheading the diverse check-writers term sheet initiative from the very beginning, and work with the companies to make sure that there is a large composition of sources of capital, from women to people of color, LGBTQ folks, diverse, and other neurodiverse communities, for example.
We strive hard to make sure that our group of investors continues to be composed of incredibly diverse individuals. We’re getting close to 4,000, with about half of them identifying as LGBTQ, over a third being women, and anywhere between 25% and 30% being investors of color. We would love to see those numbers rise and make sure there is even greater representation in communities. It’s always a work in progress.
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