Nov 4, 2026 · 59 min
Jack Selby challenges Silicon Valley’s venture capital model
E451: Peter Thiel's 27-Year Partner on the AI Bubble, the Venture Capital Crisis, and the PayPal Mafia
The episode tests whether disciplined, lower-cost investing outside coastal hubs can outperform inflated AI-era valuations and oversized funds.
- 1Copper Sky backs exceptional founders beyond the major coastal hubs, where lower costs can support more disciplined entry prices.
- 2Selby argues venture capital’s weak returns reflect mega-funds, excessive fundraising, high valuations, and the long unwind of cheap money.
- 3AI may expand opportunities for smaller regional teams, but capital intensity and limited proof remain serious challenges for non-coastal investing.
Don't miss
Selby concedes that the strongest challenge to Copper Sky’s thesis is the absence of proven top-decile results from non-coastal venture investing.
The brief
Jack Selby, a longtime Peter Thiel associate and early PayPal employee, connects the company’s intense operating culture to his broader critique of today’s venture capital industry.
His central bet is geographic: many technology companies can be built outside California, New York, and Massachusetts, where talent is underfunded and entry prices are lower.
Copper Sky’s strategy favors exceptional founders across the other 47 states, while acknowledging that frontier AI research may still benefit from coastal talent density.
The episode’s sharpest tension is whether lower prices compensate for the lack of proven top-decile results from non-coastal venture investing.
Selby also argues that AI will become a standard startup component, making smaller teams more viable even as infrastructure costs and valuations rise.
His broader lesson is an investor’s preference for explicit assumptions over momentum-driven narratives, especially as mega-funds and AI enthusiasm reshape venture returns.
What was said on this episode
38 statements · 17 positive · 15 negative · 1 mixed · 5 neutral
Venture capital returned capital poorly over the past decade.
“The industry has done a poor job of returning capital to its investors over the last decade.”
Listen at 0:36
Eight venture firms raised approximately $70 billion collectively.
“eight firms went out and raised, I think an aggregate of $70 billion earlier this year”
Listen at 0:46
Remaining private-technology capital is concentrated in late-stage AI deals.
“that capital is infatuated with shiny toy late-stage AI deals”
Listen at 1:04
Peter Thiel’s strongest PayPal-era skill was hiring management.
“arguably his best skill, at least from the PayPal days, was as a hiring manager.”
Listen at 6:07
Carvana currently has approximately a $65 billion market capitalization.
“fast forward today, Carvana is a $65 billion market cap company.”
Listen at 9:00
A Carvana-like company should not be built in Palo Alto.
“the next Carvana should absolutely not be built in Palo Alto.”
Listen at 9:17
Frontier AI companies like Anthropic should be based in Palo Alto.
“if you're building the next Anthropic, you should probably be based in Palo Alto.”
Listen at 9:37
Most AI-enabled technology companies can be built outside Palo Alto.
“if you're building almost any other type... of technology company ai enabled company you can build that elsewhere”
Listen at 9:41
Silicon Valley’s network effect is not primarily human-capital based.
“It is not a human capital network effect.”
Listen at 10:33
Silicon Valley’s network effect is primarily financial because capital is concentrated there.
“What is the network effect is a financial. network effect because that's where the money is.”
Listen at 10:37
Frontier AI companies such as Anthropic and OpenAI are a small minority of startups.
“Anthropic and OpenAI are in the vast minority.”
Listen at 12:54
Non-coastal U.S. regions contain many talented entrepreneurs.
“there are plenty of talented entrepreneurs amongst this 290 subset population.”
Listen at 14:18
More Cleveland venture capital would retain some Case Western graduates locally.
“I guarantee you the number is not zero in terms of the number of the Case Western graduating class that I can keep in Cleveland if there's more venture capital in Cleveland.”
Listen at 16:03
Non-coastal venture funds need Silicon Valley connectivity to succeed.
“if you're trying to operate on an island in one of these non-coastal places without that connectivity, I think it makes the probability of success really, really low, if not impossible.”
Listen at 18:05
Venture investment entry price materially affects outcomes.
“entry price matters.”
Listen at 19:25
“the probability of that is basically zero.”
Listen at 20:25
A $500 million outcome is more realistic than finding another Elon Musk.
“my minimum bar that I need to cross, that $500 million threshold, is easier. It's more realistic.”
Listen at 20:46
No non-coastal venture strategy has yet demonstrated top-decile returns.
“no one has done this successfully in putting up solid top decile numbers yet.”
Listen at 24:32
AI is now ubiquitous across startup businesses.
“AI has become so ubiquitous, so pervasive.”
Listen at 25:40
AI will soon become treated as a standard business component like the internet.
“I think we're very close.”
Listen at 26:14
AI enables smaller teams to achieve strong venture outcomes.
“you can build companies with more efficient rosters, smaller teams to be precise, and you can get to outcomes that still generate very good venture returns.”
Listen at 26:46
Targeting only trillion-dollar companies is a poor venture strategy.
“It's a terrible idea.”
Listen at 27:14
Finding trillion-dollar companies is less probable than finding billion-dollar companies.
“that's even less probable.”
Listen at 27:44
College endowments would be satisfied with broad-market-like returns.
“we'd be very happy with mass returns.”
Listen at 28:29
Excessive capital flowed into venture capital after the financial crisis.
“way, way, way, way too much capital got stuffed into this otherwise tiny asset class.”
Listen at 37:24
Excess venture capital funding created too many underperforming managers.
“That then spawned way too many managers that have turned out to be B minus or worse.”
Listen at 37:29
“they crystallized no gains and rode the wave down.”
Listen at 38:10
Venture capital’s industry cleansing remains in an early stage.
“we might be in the second inning at best.”
Listen at 39:24
“It's a real gap that's being left.”
Listen at 42:15
Mega-funds constitute a distinct asset class from earlier-stage venture funds.
“I think the mega funds are a different asset class.”
Listen at 43:20
An AI bubble is currently the consensus view.
“anyone who doesn't believe that there's an AI bubble is an absolute contrarian today.”
Listen at 46:36
AI can lower company-building costs and accelerate revenue and venture returns.
“AI enables companies to be built much more cheaply, achieve revenue much more quickly, get to good outcomes much more quickly, and generate good, if not great, venture capital returns”
Listen at 47:31
SpaceX and Anthropic are exceptionally rare companies.
“These are once in a generation, if not once in a lifetime type companies.”
Listen at 47:56
Macro investing and market volatility have returned.
“I think macro is back. I think volatility is back.”
Listen at 54:04
Current macro conditions offer opportunities for skilled investors to make money.
“I think this is a great opportunity to potentially make money.”
Listen at 54:26
Macro investing opportunities are better now than during the post-crisis period.
“I think the opportunity set is better now than what it had been for so long.”
Listen at 54:42
Momentum markets can generate substantial profits for participants.
“When the momentum market is going, it's a great way to make money.”
Listen at 56:27
Current venture valuations will correct, but Copper Sky will be relatively resilient.
“when this market currently corrects, which it will happen, it'll be when, not if, I will be relatively fine.”
Listen at 57:51
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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