We are in a capability shift, not an efficiency cycle.

In a growing number of domains, machines are increasingly able to match or exceed human performance. Systems from OpenAI can generate analysis comparable to expert human work in many subjects. With each passing month, companies like Decagon are pushing customer support toward near-human fluency, while Waymo’s autonomous rides feel smoother and safer than cars driven by people.

“This is the year AI connects to your data, understands you better than anyone, including yourself, and becomes a trusted advisor, coach, and assistant, helping you become the best version of yourself, personally and professionally.”

Redpoint,

From Pilots to Platforms: Picks for ‘26

AI is enabling companies to rebuild workflows – and in some cases, entire industries – rather than optimizing legacy processes. That shift creates compounding advantages. Menlo Ventures estimates companies spent $37 billion on generative AI in 2025, an increase of 3.2x up from $11.5 billion in 2024. Nearly $19 billion flowed into the application layer – user-facing products built on top of foundation models – representing more than 6% of the entire global software market. No other technology cycle has reached this level of adoption, spending, or market penetration so quickly.

These dynamics reinforce a central feature of venture: it’s a non-linear system. Outcomes do not converge toward an average. Early leadership does not guarantee dominance, but it does shift the distribution of the outcomes. Once a company establishes a durable lead, growth becomes increasingly path-dependent. Early customers enable better data, better products, and stronger distribution, and that momentum attracts talent, capital, and distribution. These advantages begin to reinforce each other.

In power-law markets, winners look nothing like the median.

Scale can amplify momentum rather than introduce friction, which helps explain why the leap from $100 billion to $1 trillion can happen faster than the climb from $10 billion to $100 billion. In this environment, access to category leaders matters more than ever.