M13 and Basis Set Ventures investors outline AI strategy and LA ecosystem outlook at StrictlyVC

TechCrunch’s StrictlyVC evening in Los Angeles brought together Carter Reum, co-founder of M13, and Chang Xu, partner at Basis Set Ventures, to dissect the complexities of artificial intelligence investment. The discussion, held in El Segundo in late June 2026, addressed the tension between unprecedented growth curves and the daunting competitive landscape dominated by hyperscalers. Both investors emphasised the need for rigorous valuation frameworks in a market where revenue acceleration has outpaced historical norms.

Reum noted that M13 manages $2.5 billion in assets and has backed 17 unicorns as a seed or Series A investor, while Xu highlighted that Basis Set Ventures is deploying capital from its fourth fund, which holds nearly $1 billion in assets under management. Xu pointed to portfolio company Open Art as a case study for this new growth paradigm, citing its rise from $1 million to $70 million in annual recurring revenue over two years with a lean team of 20. He argued that while such metrics justify higher valuations, pricing every deal to this standard creates a paradox that risks portfolio performance.

The conversation turned to the structural challenges facing startups, with Reum observing that this cycle differs from previous technological booms because innovators are competing not just with peers, but with the world’s most well-funded incumbents. He argued that large tech firms possess distinct advantages in data, capital, and talent, which can rapidly neutralise early-mover advantages. Consequently, Reum advised founders to balance immediate execution with long-term strategic foresight, describing the environment as one where the board changes constantly.

Xu elaborated on investment frameworks, distinguishing between velocity markets, where speed of execution is paramount, and depth markets, where hard technical barriers persist. He cited examples ranging from infrastructure tools designed for AI agents to biotech ventures using transgenic chickens for protein manufacturing. Both investors stressed the importance of identifying defensible moats, such as regulatory friction in sectors like healthcare or 911 call centre disruption, where hyperscalers are less likely to intervene quickly.

Looking ahead to the Los Angeles ecosystem, Reum predicted that the upcoming SpaceX IPO would distribute wealth more broadly than typical venture exits, potentially fueling a second wave of innovation. Unlike the institutional-heavy exits of companies like OpenAI or Anthropic, the SpaceX liquidity event is expected to empower individual employees and local entrepreneurs. Reum and Xu suggested that while San Francisco retains technical dominance, Los Angeles is well-positioned to lead the next phase of AI development, which they describe as increasingly focused on taste, emotional resonance, and cultural relevance.