What is the VC hype cycle?

The "VC hype cycle" refers to a common pattern observed in the venture capital industry, where new technologies or sectors attract significant investment and media attention in a relatively short time, leading to inflated expectations, followed by a period of disillusionment, and then a more realistic understanding and application of the technology or sector.

Alex Lebrun, a veteran in building AI companies, described the VC hype cycle as a phenomenon where venture capitalists (VCs) chase the latest trends, particularly in artificial intelligence (AI). He noted that this cycle of excitement and disappointment repeats roughly every three to four years, and the key for businesses is knowing when to emphasize or de-emphasize AI in their presentations to investors 1.

Elad Gil also discussed the nature of hype cycles in tech investment, illustrating that while many ventures fail during these cycles, a small percentage succeed spectacularly. He emphasized the importance of distinguishing oneself in a crowded market and navigating the cycle strategically to emerge as a lasting entity 2.