Originally published on Allegory Capital.
TLDR: An AI agent screens early-stage deals 537 times faster than a human analyst, so the diligence labour a fee paid for is collapsing in cost while the fee climbs — a repricing every capital allocator should watch.
The work got cheaper
A peer-reviewed study led by Silvio Vismara ran a large language model (LLM) agent across 61,814 ventures and found it operated 537 times faster than a human analyst with no loss of quality, a shift Harvard Business Review documents in how generative AI is reshaping venture capital. First-pass diligence is becoming industrial throughput.
The fee did not
Dan Gray of Odin shows fee income detaching from the work it pays for — the top five firms generated roughly $150 million each in 2005 versus roughly $1.6 billion by 2025. The Jensen–Meckling principal–agent lens explains it: a fee pays for labour and judgment bundled together; AI commoditises the labour while access, conviction and judgment stay scarce. Public-market managers already run nearer 0.5 per cent than 2 per cent.
References
- Vismara, S. et al. Generative AI-powered venture screening. https://www.sciencedirect.com/science/article/pii/S105752192500835X
- Gray, D. (Odin). The Magical Money Tree of Management Fees. https://blog.joinodin.com/p/the-magical-money-tree-of-management
