FGV Capital Says AI Startup Rock Stars Need Different VC Roadies

AI is giving founding teams more time to establish product-market fit before adding staff and raising the next round.

FGV Capital Co-Founder Marcos Fernandez tells Karen Webster that the economics of multibillion-dollar funds are helping push larger checks and valuations into the seed market.

Customer traction, a focused market entry and sound cap tables still determine whether a young company can finance its next stage.

Watch more: Need to Know With FGV Capital’s Marcos Fernandez

The first institutional check used to finance much of the machinery required to turn an idea into a company. Founders needed engineers, product teams and other employees early, often before they had enough time with customers to know exactly which version of the product deserved to scale.

Artificial intelligence is changing the sequence of events, according to Marcos Fernandez, co-founder and managing partner at FGV Capital.

“You have more time, especially when you talk about runway or the amount of time you have before you need to raise additional capital,” Fernandez told PYMNTS CEO Karen Webster. Founders have some leeway to focus on “honing that wedge, honing that product, understanding the vertical that you’re going into.”

On the venture capital side of the equation, some seed rounds have become large enough to resemble later-stage financings even as the cost of reaching early product milestones falls.

Fernandez sees fund economics as part of the explanation. Multibillion-dollar platform funds have moved down into earlier rounds, while the sheer amount of capital they manage requires investments large enough to affect fund returns. A manager overseeing billions of dollars, he said, can’t deploy its portfolio through a succession of $5 million or $10 million checks. Competition at the seed stage can therefore produce $20 million, $30 million or $40 million funding rounds and higher valuations.

Experienced founders have reasons to resist letting a large first round dictate the company’s financing strategy, Fernandez noted to Webster. A sound cap table and sensible fundraising cadence still matter, particularly if the investor supporting an early valuation doesn’t participate in subsequent rounds. Customer traction remains the more durable currency.

“The number one thing that’s most important isn’t the round dynamic,” Fernandez said. “It’s traction from customers. It’s showing that people are utilizing this tool and that you’re preparing yourself for scale.”

Fernandez calls founders the rock stars and VCs the roadies. In an AI economy, the analogy places more weight on the second half of the equation. Investors have to demonstrate what they can do for a founder who may already have a working product, initial customers and several financing choices.

When software can be built in weeks, or sometimes over a weekend, Fernandez said distribution, data and the company’s initial wedge carry more weight.

Speed also shortens the distance between a product and its imitators. Large prospective customers complicate the equation further. They are buying AI products while simultaneously developing the ability to build more software themselves.

A startup selling into that environment needs more than a capable demo. From his own vantage point, Fernandez said FGV looks for applications capable of producing a “20 to 30X improvement” over an existing process. Against that backdrop, the salient measure isn’t whether a customer wants an AI product. It is whether the product can produce an economic result that wasn’t previously practical.

He cited cybersecurity and fraud, insurance underwriting and healthcare as areas where those gains can be visible. Fernandez boils the economics down to “either dollar saved or revenue generated,” with the strongest cases accomplishing both.

AI Forces Venture Firms to Define Their Job

Fernandez applies the same standard to the companies themselves. “Every company should be AI native,” he said, referring to the use of AI to write code, test products, develop marketing programs and operate with fewer resources. He doesn’t consider those capabilities distinctive. “That’s table stakes.”

Investment decisions begin further downstream, with the business problem and the economics of solving it.

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FGV’s view of FinTech starts from where financial activity is headed rather than from the conventional boundaries of the sector. Fernandez cited cross-border finance and stablecoins, particularly in emerging markets where inefficient fiat corridors create demand for access to more stable currencies. He also pointed to agentic commerce, with early use in travel and commerce, and financial tools serving people whose work and income span several activities.

Finance has already moved well beyond companies that call themselves financial institutions. Fernandez pointed to rewards programs, airline credit cards and digital wallets as examples of financial products becoming part of businesses whose primary activity lies elsewhere. FGV also looks at what he called “dusty industries,” established financial categories where older processes remain available for technological improvement.

Agentic AI could widen the territory again as consumers become comfortable delegating more tasks to software. “It’s hard to find anyone who isn’t interested in experimenting with AI in some capacity,” as Webster noted.

Fernandez expects adoption in financial services to proceed unevenly because money carries regulatory requirements and questions of trust that don’t apply to every AI application.

Some activities may eventually be delegated to agents. In wealth management and other relationship businesses, AI may instead help people make decisions while the human relationship remains central. Cross-border payments, wealth management and small business financial management are among the areas where he said practical adoption remains early.

Venture capital is subject to many of the same pressures. Fernandez sees multibillion-dollar platform funds at one end of the industry and emerging managers with specialized operating models at the other. Firms caught between the two may have difficulty competing for founders unless they can identify a concrete capability that accompanies their capital.

“We’re at the forefront of a change in venture capital as well,” Fernandez said. Over the next five years, he expects investors to need something “substantial” and specific, tied to a market, a service or a company-building problem.

FGV is making its case as it closes an oversubscribed $35 million Fund II, above its original $25 million target and bringing total assets under management above $60 million. FGV Capital has invested in more than 40 companies across its funds and co-investment vehicles, with investments spanning FinTech, healthtech and AI.

The firm’s venture business grew alongside a consultancy that works on distribution, strategic finance, recruiting and other operating functions. Fernandez argues that the relevant measure of a VC relationship extends beyond the confines of funding flows.

“Capital’s commoditized,” he told Webster. “It’s not about the investment we make. It’s about what we bring to the table both before and after that investment.” For the roadies, the check is no longer sufficient evidence of their value. AI is giving the rock stars more leverage to decide what else they expect from the people backstage.

Watch the full interview with Marcos Fernandez to learn more about:

PYMNTS CEO Karen Webster is one of the world’s leading experts in payments innovation and the digital economy, advising multinational companies and sitting on boards of emerging AI, healthtech and real-time payments firms. She founded PYMNTS.com in 2009, a top media platform covering innovation in payments, commerce and the digital economy. Webster is also the author of the NEXT newsletter and a co-founder of Market Platform Dynamics, specializing in driving and monetizing innovation across industries.

Marcos Fernandez is co-founder and managing partner at FGV Capital and a former FinTech operator whose experience includes SoFi and Ripple.