# Mitchell Green: Why 50% of VCs Should Not Exist & Why China will Win the AI War Source: https://www.youtube.com/watch?v=rPaWW0IDurI Recap page: https://rapidrecap.app/video/rPaWW0IDurI Generated: 2026-03-07T15:02:59.931+00:00 --- ## Quick Overview Mitchell Green asserts that 50% to 70% of venture capitalists should not be in the business due to excess money and too many tourists who add negative value, while predicting a significant market downturn within the next decade, and strongly betting that China will ultimately win the AI war due to advantages in power resources and valuing science. **Key Points:** - Mitchell Green estimates that "50 60% of people in this industry that actually probably add negative value to companies," citing tourists and those raising billions for mere ideas. - Green states that he and his firm, Lead Edge, are currently buying software stocks like Procore, Workday, and Toast because incumbents possess "distribution, data, and balance sheets." - He believes the current stock sell-off is due to Wall Street estimates being too high, predicting a temporary period of "dead money" before estimates are reset and stocks recover. - Green expresses unwavering negativity towards companies where the founder is not the CEO, favoring management teams focused on growth during technological transformations. - He names ByteDance as "the most advanced AI company in the world" and predicts China will win the AI war because they can build infrastructure like nuclear power plants faster and highly value science and technology. - Green emphasizes that selling is the job, advising investors to constantly under-reunderwrite and ensure they are making 2x to 5x returns in three to seven years to maintain a 25% IRR fund. - He criticizes raising money based solely on an idea, noting that raising billions for "nothing more than an idea in a napkin," such as some AI spin-outs from Anthropic or OpenAI, seems like "complete lunacy." **Context:** The discussion features Mitchell Green of Lead Edge, an investor known for backing companies like Alibaba and ByteDance, interacting with the host about the current state of the software market, venture capital discipline, and the future of Artificial Intelligence. The conversation immediately addresses the perceived "SAS apocalypse" and whether current market corrections are justified, while also touching upon investment philosophy, company leadership structures, and the competitive landscape between the US and China in AI development. ## Detailed Analysis Mitchell Green believes the venture capital industry is bloated with tourists who provide negative value, suggesting 50% of participants lack the necessary discipline on price. Regarding the current software market downturn, Green states his firm is actively buying established software companies with strong fundamentals like Workday and Toast, dismissing fears that incumbents will disappear entirely, although acknowledging disruption will occur. He attributes the stock sell-off to overly optimistic street estimates that will need to be lowered before stocks can rally again. Green strongly favors founder-led companies, especially during technological transformations, believing companies run for growth, often led by entrepreneurs, are best positioned. He highlights ByteDance as the world's most advanced AI company and predicts China will win the AI war due to superior infrastructure build-out capabilities (like power plants) and a high cultural valuation of science and technology, contrasting this with potential US power constraints. A core tenet of his investment philosophy is discipline: investors must sell winners and focus on achieving a targeted 2x to 5x return over three to seven years, noting that liquidity windows open and close, and giving money back to LPs via DPI is paramount. He also criticizes the trend of raising massive seed rounds for unproven ideas, especially those spinning out of top AI labs, without clear paths to profitability. ### VC Industry Critique - 50-60% of people in venture capital add negative value due to too much money and too many tourists - Raising billions for just an idea on a napkin is "complete lunacy" - Discipline on price matters, contrasting with those seeking power law returns at any cost. ### Public Software Market Assessment - Lead Edge is buying incumbents like Workday and Toast because they have distribution, data, and balance sheets - Current sell-off is due to overly high street estimates that analysts will lower, leading to a period of "dead money" - Investors should buy fundamentally good businesses on multiples of earnings, as "if you don't have earnings or IBIDA, there is no floor." ### Leadership and Growth Philosophy - Green agrees founders should often remain CEO during transformation, favoring management run for growth over margins - Highly leveraged companies struggle to innovate during disruption, referencing the dot-com era where unlevered companies like Walmart survived by betting on new tech. ### AI Landscape and China Advantage - ByteDance is the most advanced AI company, underappreciated by the West - Green bets China wins the AI war due to power resource availability and valuing science - He notes the massive capital expenditure by US giants like Meta and Google contrasts with Apple's lower spending, suggesting the right answer is in between. ### Investment Strategy and Liquidity - The job is selling, advising investors to "constantly under reunderwrite" to achieve 2x to 5x returns in 3 to 7 years - Investors must take advantage of open liquidity windows by selling portions of winning positions to return capital (DPI) to LPs. ### VC Value Add - The best way VCs help founders is by connecting them with experienced operators for recruitment and then getting out of the way - Negative value comes from VCs acting like experts without having run a company or pushing for unnecessary spending ("burn money burn money") because of high entry valuations.