The AI Price War Nobody Saw Coming with FirstMark's David Waltcher

The rapid advancement of artificial intelligence is fundamentally reshaping venture capital strategies in enterprise software and security. While the industry initially prioritized "token maxing," a shift toward efficient, task-specific model routing is emerging, as smaller, cost-effective models often prove sufficient for routine business functions. Established enterprise incumbents like Salesforce and ServiceNow remain resilient due to high switching costs and deep ecosystem integration, even as AI agents begin to automate complex workflows. Meanwhile, the security sector faces a new paradigm of threats, including agent-based vulnerabilities, prompting a surge in M&A activity as legacy firms acquire specialized startups to bolster their defenses. With Chinese AI models rapidly closing the performance gap, the global market is entering a period of intense price competition, forcing investors to reevaluate capital allocation and the long-term sustainability of current AI-driven business models.