In 2017, artificial intelligence was more of a buzzword than a category that warranted a dedicated VC fund. “Chat bots” had a moment. Crypto was ascendant. SaaS unicorns were minted by the day. Most venture capitalists treated AI as a research discipline; it felt interesting and potentially important, but profitably distant. The idea that AI-native startups would become the next generation of category-defining companies was theoretical to almost everyone.

That same year, the Transformer paper was published, and we founded Gradient with a singular conviction: AI would be the greatest technological development of our lifetime. Gradient was built to be an early-stage venture firm focused exclusively on AI, not as a side bet, but as the entire mandate. At the time, this made us niche. In hindsight, it made us inevitable.

Nearly a decade later, AI is no longer speculative, it’s systemic. Capabilities that once took years to build are being shipped in weeks and in some cases even days or hours. Some have taken this as a signal that “software is over.” We see something very different: the coming of a new generation of AI-native software, agents, and full-stack companies.

Today, we’re proud to share the next chapter of that story: officially announcing the launch of our oversubscribed $220 million Fund 5, and as a fully independent firm.

Same team. Same focus. Same conviction.

Our origin

Gradient was founded in close partnership with Google at a moment when few institutional investors wanted to take the risk of backing an AI-only fund. The ecosystem was nascent. The outcomes were uncertain. And yet, the opportunity felt clear: find the earliest AI-native founders and help them turn research into iconic businesses.

We did just that. Over the past decade, we’ve backed more than 500 AI founders across applied AI, infrastructure, and new category-defining businesses. And as the AI ecosystem matured, it became evident that what was once a niche has become the defining technological shift of our generation. Every serious technology company is now an AI company. Every ambitious founder is now building with AI.

Lambda started as a hardware company selling custom workstations to AI researchers, now it’s one of the largest GPU clouds in the world. Oura started in a small town in Finland, founded by a bunch of former heart monitor engineers, now it’s a global AI health brand. Streamlit worked out of a small house in the Haight for years, now it powers a worldwide community of data scientists and AI builders. These are just examples of some of the incredible companies we’ve been fortunate to work with from the beginning.

And with this platform shift comes a new reality for early-stage investing:

• What looks like a moat today can become a commodity tomorrow.

• The earliest stage is where the most disruptive, most contrarian investments are made.

• AI founders want technical partners with company-building experience from the beginning.

Gradient’s independence allows us to do what we’ve always done: be the first institutional check, spend real time with founders at pre-seed and seed, and scale a community that compounds across decades. Google remains a valued LP and long-term partner. Our relationship is enduring and our mandate continues to be to serve our founders first.

What we believe about AI

Advancements in AI have brought us to a pivotal moment for software. Public SaaS multiples have compressed sharply, and many have interpreted that as a verdict on software itself. We don’t. SaaS isn’t dead, but parts of it are decaying. Multiples have compressed not because recurring revenue lost its value, but because the market is repricing which revenue streams are positioned to accelerate in an AI-native world.

We’ve been investing in AI for nearly a decade. That history has granted us strong convictions about what it takes to win in this space. Our core areas of focus evolve with time, technology and markets but have always centered on applied AI. With our Fund 5, we’re actively investing in:

• Reinvented B2B software - built AI-native from day one

• AI agents - reshaping how work gets done

• The AI developer stack - powering the next generation of builders

• Real-world AI, from biology to materials, from robotics to compute substrates - extending the possibilities of physics

• Open source, small models, hybrid compute - optimizing the greatest capabilities and resource demands in human history

We also have strong beliefs in the types of founders who can win in this environment. This moment favors founders who understand that moats must evolve. The next decade of software will reward platforms that invite builders in, integrate deeply with systems of record, and design pricing and packaging around value creation. As incumbents reposition and growth capital reallocates, new category leaders will emerge faster than in any prior software cycle. We aim to back founders with:

• Technical rigor

• An obsession with quality

• A deep desire to build an iconic and durable business

• The speed to iterate faster than the market can copy

Fund 5 and what’s next

The next wave of AI companies won’t look like this one. They’ll be quieter at the beginning. More technical. More opinionated. More efficient and scalable. More consequential.

Gradient was built for moments like this: when things are uncertain, when everyone is saying “software is over”, before the outcomes are obvious, before the market agrees. If you’re working on something that doesn’t yet fit neatly into a pitch deck, that’s for us often a feature, not a bug.

We’re actively investing from Fund 5. Reach out or follow us on X and LinkedIn for updates.