Founders are panicked about 2026. I see it every day in my community. They are worried about cash, they are worried about customers, and they are worried about the future.

But investors should be terrified.

I have spent the holidays looking at the portfolios, the deal flow, and the real exit numbers. I am not talking about the Twitter hype. I am talking about the math.

The "spray and pray" era is officially dead. The "AI Premium" on valuations is gone. Those investors who are still operating with a 2021 mindset, are going to lose their LPs' money.

2026 is the year of the Great Reset. It is going to be messy, brutal, and absolutely necessary.

Here is exactly what I think happens to investors’ money next year.

Let’s rip the band-aid off. Majority of the VCs have companies in their portfolio right now that are just thin wrappers around OpenAI or Anthropic.

Investors convinced themselves these companies had a moat. They told their LPs that these startups had "proprietary workflows." They don't.

In 2026, most of these companies go to zero.

The underlying models are getting too good and too cheap. The specific features these portfolio companies built - summarizing PDFs, writing emails, basic code generation - are becoming standard buttons in Microsoft Word.

The Reality: We are not getting AGI in 2026. What we are getting is "Extraordinary Specialized Intelligence." The models will dominate specific domains (law, coding, medical) so completely that any startup offering a "general" assistant will be crushed.

Investors should audit their portfolio asap. If the only advantage of their portfolio companies was "we were first to market," they should be marked down. The wrappers are zombie companies walking.

This is the macro risk no one wants to talk about.

Hyperscalers like Microsoft and Google are spending $600 billion on AI infrastructure. The buildout is real. But the revenue is not matching the spend.

We are heading into an "Air Pocket."

Investors are waking up to the fact that you need $650 billion in AI revenue to justify this CapEx, and the market is only generating about $100 billion. The math doesn't work.

This doesn't mean the tech fails. It means the sentiment will crash. We will see a pullback in funding for "infrastructure" plays that cannot show immediate utility. For those who are investing in "picks and shovels" that don't have customers yet, they are about to fall into this hole.

It has never been easier to start a company. That sounds good, but it is actually a nightmare for investors.

In the old days, building a pitch deck and an MVP took months. It showed commitment. Today, a founder can use AI to generate a pitch deck, build a financial model, and write the MVP code in a weekend.

This means the barrier to entry is zero.

Investors are about to be flooded with thousands of "startups" that look perfect on paper. The deck will be beautiful. The numbers will look logical. But there is no soul and no real business behind it.

Inboxes will be trash. The signal-to-noise ratio in 2026 will be the worst in history. Investors who rely on inbound forms will drown in AI-generated noise.

Because digital traction can now be faked by AI bots, investors can’t trust the data room anymore.

We used to look at "Active Users" and "Engagement Time" as the holy grail. Today, for $100, I can buy a bot farm that mimics human behavior perfectly.

Smart investors are moving back to physical diligence. This is the old-school way, and it is the only way left.

The only undeniable data is physical. If a company is "fully remote" and investors have never met the founders in person, they are not investing. They are gambling.

While Silicon Valley argues about "safety" and "alignment," China is deploying.

Look at the numbers for autonomous driving.

In the US, Waymo has about 2,500 cars. Tesla has a pilot with maybe 50.

In China, Baidu and Pony.ai are operating in 22 cities. Their cost per mile is a fraction of ours.

By the end of 2026, Chinese operators will likely complete 5x more paid autonomous rides than US operators.

The lesson for investors: Stop betting on "Capability" (who has the smartest model). Start betting on "Deployment" (who can actually put the tech on the street). The regulatory gap in Europe and the US is becoming an investment risk. If the startup is waiting for permission to launch, they are already dead.

Investors should check their B2B SaaS portfolio today. If they charge "per seat," they are sitting on a time bomb.

For twenty years, the model was simple: sell software, charge $50 per employee.

But AI agents are getting dangerously good. By late 2026, we expect agents to handle tasks that take a human 14 hours to complete, with high autonomy.

A law firm that used to need 50 junior lawyers will soon only need 5 lawyers and a server farm of agents.

Fewer humans means fewer seats.

B2B SaaS startups might see usage go up - because the AI is working hard - but their revenue will crash because the seat count drops. Founders should be forced to switch to usage-based pricing now. If they don't, investors will watch their ARR vanish in Q3.

Consumer SaaS is dead. The next unicorns are not building marketing tools. They are building for the state.

Globalisation is over. Europe has woken up. We see it with the new tariffs and the panic over "sovereign compute." Governments have realized they rely too much on the US and China.

They are pouring billions into "Sovereign Tech": Defense, Energy, and Chips.

Investors should stop looking for the next Instagram. They should look for the founder building drone defense systems or local energy grids. The government is the new LP. They are writing the biggest checks, and they are the stickiest customer startups will ever find.

In 1985, Intel exited the memory business to focus on chips. It was a genius move then.

Today, the tables have turned. Memory is the bottleneck.

High Bandwidth Memory (HBM) is sold out through 2026. The companies that make the "boring" stuff - cables, cooling, memory - are printing money while the AI model builders burn it.

AI disrupts code, copy, and design. It cannot disrupt atoms.

While everyone fights over the next LLM, smart investors are looking at "unsexy" legacy industries. In 2026, boring is profitable.

We need to stop lying to ourselves about "intuition."

Investors love to say they know what a great founder looks like. They love to talk about "pattern recognition."

Statistically, you are wrong.

If "gut feeling" worked, venture funds would be returning massive ROI. They aren't. Most are barely breaking even.

The "Gut Feel" method is broken. But the "Data" method is also broken if you just scrape LinkedIn. Every associate has that data.

The only "alpha" left is Offline Data.

I am talking about the data that doesn't exist on the internet.

The winners in 2026 won't be the "visionaries." They will be the funds that capture real-world behavioral signals. This is exactly why we built the Rare Founders data engine. If you are investing from behind a screen, you are buying the leftovers.

Finally, let's talk about the overall VC market.

It is not just startups that will die next year. 2026 is when we lose a lot of VC funds.

Too many emerging managers raised "Fund I" during the free money era. They sprayed capital into hype deals based on FOMO.

Now, the LPs are asking for the receipts.

The math is brutal. If VCs haven't returned actual cash (DPI) by now, they are not raising Fund II. There is no more patience.

We will see a quiet disappearance of hundreds of micro-funds. They won't announce it. They will just fade away.

This is actually good news. The market is overcrowded. Bad investors need to be washed out just like bad startups.

2026 is going to be painful for lazy investors. The "index the market" strategy won't work because most of the market is noise.

But for active investors who understand sovereign needs, physical moats, and real unit economics, the vintage of 2026 will be legendary.

The prices are lower. The “tourists” are leaving. The real builders are staying.

Get off Twitter. Go meet founders in real life. And for god's sake, stop investing in wrappers.

Good luck.

✅ If this made you think, share it with your network. The easy money is gone. The more people who understand the new rules of 2026, the faster we fix the market and get back to real business.

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