Vani Kola on the 'compression effect' governing current startup ecosystem

“Compression effect”, a phenomenon where every major technological shift drastically reduces the time it takes to create value, has become a buzzword in investor presentations today. But as Vani Kola, Managing Director at Kalaari Capital, reminded founders during her keynote address during YourStory's TechSparks 2025, titled “The VC’s Compass: Resilience & Reinvention in India’s AI Decade”, the idea itself isn’t new.

Kola explained that every breakthrough—from the internet to mobile to AI—has accelerated the time it takes for businesses to reach key milestones. “AI is compressing time,” she said, referring to how artificial intelligence is shortening the distance between innovation and impact.

To illustrate, she compared the trajectories of two companies: Netflix, which took about three and a half years to reach 200 million users, and OpenAI’s ChatGPT, which crossed 100 million users within a week of launch. The contrast, she said, demonstrates how AI is “accelerating time to value” and forcing startups to rethink how fast they can deliver meaningful outcomes.

The rise of new inflection points

Every major technology wave, whether it is AI, mobile or cloud, compresses time by accelerating how fast value can be created, delivered, and scaled. This compression in time leads to convergence of forces such as lower costs, faster adoption, and the emergence of new capabilities.

This creates new inflection points that founders can build for. A founder needs to have insights into such inflection points. For instance, today, data speed and accessibility have reached a level of ubiquity, triggering a network effect across industries. If more users are online, more data is generated, which leads to better services, giving rise to wider adoption, which helps gather more data, and the cycle goes on.

Kola drew examples from the rise of ecommerce. She said lower costs of data created an opportunity for ecommerce players. Similarly, lower computing costs led to wider usage of artificial intelligence. “AI is not new. It’s been around since the 50s in research labs, but computing power and costs had to reach that inflection point for processing of larger language models and huge amounts of data in real time.”

The lens with which VCs are eyeing AI bets

Venture capital firms today are looking for companies that are moving fast and led by founders who understand “speed to value” and not just the speed to launch, Kola noted.

The investor also noted that VCs today prefer deep, narrow, and high-value problems. “Most of the AI investments we have made at Kalaari have been in vertical AI, which is companies following very domain-specific problems.”

Kola also pointed out an emerging idea in the VC ecosystem, which is founder-market fit. The founder should have a personal or professional insight into the problem their company is trying to solve and someone who can develop and move fast because they understand the context within which they are operating.