Venture Capital Is Moving to the Foundational Layer
In 2024 OpenAI and Anthropic together captured about fourteen percent of global venture capital invested in the technology sector. Two companies, out of thousands funded each year, attracted nearly one-sixth of all technology-focused venture capital. The concentration is exceptional, without precedent in the history of the industry, including the consolidation phase of the early 2000s internet.
To understand the shift, one must look at market structure rather than the numbers alone. Venture capital typically distributes bets across fragmented early-stage markets where first-mover advantage is not yet consolidated. Concentration on OpenAI and Anthropic indicates something different: the market has already identified the layer where durable structural advantage will form, and that layer is the foundational model layer.
Foundational models constitute the cognitive infrastructure on which everything else is built. Those who control GPT or Claude do not merely sell a product; they provide access to a capacity that preconditions thousands of downstream applications. The position resembles that of operating system owners in the 1990s: Microsoft did not compete with each application but extracted rent from every application running on Windows. Foundational models reproduce that structure of power at the cognitive level of the economy.
Brynjolfsson and McAfee (2014) anticipated that digital technologies would generate a polarisation between those who controlled the platform and those who operated on it, with increasing returns for the former and decreasing returns for the latter. Foundational models are the most complete expression of that prediction. The barrier to entry is not the application, since anyone can build one on an API. The barrier is the model itself, which requires investments on the order of hundreds of billions to train and maintain at competitive performance.
Venture capital has adjusted accordingly. Distributed bets on vertical applications continue, but significant capital now concentrates on the foundational layer, where structural allocative power forms. Those who control the models implicitly determine what AI can do, how it does it, with which constraints, and according to which values. These are political choices exercised through technical instruments, by private companies financed by venture capital funds, without democratic mandate.
The window of entry into this layer is closing. Computational, energy, and data constraints are consolidating existing positions. Those not already present at the foundational layer are unlikely to reach it. Capital has recognised this and is accelerating.