Three Years of AI Compression: Rethinking Venture and Infrastructure

Three years ago, Theory Ventures launched with a bet that AI would reshape software.

The market moved faster than even bullish expectations, and the firm’s anniversary post traces how AI compresses time — new models every 41 days, companies reaching $100M in record time, and the old language of venture capital breaking down.

Seed rounds now range from $1M to $500M, sometimes larger than IPOs, because the best companies mature much earlier.

This time compression redraws where opportunity lies: inference is becoming the dominant market, infrastructure is specializing by workload (video, batch, local, agentic), and advertising is emerging as the subsidy for inference costs, with click-through rates 4-5x display baselines.

The same compression has closed the gap between closed and open models, with local models now running on a laptop what once required a hyperscaler cluster.