The Only AI Moat That Matters. Plus, Why Hinge Matches Don’t Equal ARR
Why the next wave of AI winners will build systems, not wrappers
Over the past year, enterprise buyers have become far more sober about AI. The novelty phase is over. Demos aren’t enough. Leaders want systems that understand their business, operate with precision, and deliver finished work, not just text.
Across the market, the companies pulling ahead aren’t the ones with the cleverest prompts or the flashiest wrappers. They’re the ones building systems around the model: infrastructure that captures context, coordinates actions, and closes the loop between intent and outcome.
That’s the shift General Partner Joe Floyd explores in his exploration of Systems of Context, and it’s a shift we’re seeing reflected in the ecosystem. One striking example: Genspark, which reached $50M ARR and raised a $275M Series B at a $1.25B valuation in its first five months. Their trajectory is less about speed than about architecture, proving that when a product assembles the right context, customers move fast because the system actually does the work.
But Genspark is part of a broader story. AI teams across industries are rethinking what enterprise software should look like when models are just one ingredient. The orchestration layer, the data fabric, the workflow understanding. This is where differentiation is forming.
As Joe writes, the next era of AI won’t be defined by bigger models, but by smarter systems built to understand the user, the task, and the environment they operate in.
Sure, the companies that embrace this shift will help people work faster. But more than anything, they’ll fundamentally change how work gets done. It’s why we invested in Genspark and why we’re leaning deeper into founders building companies where system design defines the product.
From the Bench: New Ideas & Insights
Backing Physical Intelligence’s Next Chapter
Physical Intelligence (PI) is building the intelligence layer for the physical world: software that gives robots the dexterity and judgment needed for real, messy, human environments. The company has raised $600M led by Capital G, with Emergence participating in the round. PI’s models are already powering tasks like espresso pulls, box assembly, and consistent laundry folding, showing what becomes possible when robotics shifts from hardware-first to intelligence-first design.
What AI Can’t Touch
AI is creeping into every creative corner, but some experiences still belong only to people. In his latest post, General Partner Jake Saper reflects on why live performance remains one of the few arenas technology can’t fully replicate. After conversations with musicians like Vulfpeck’s Cory Wong, Jake explores how presence, spontaneity, and shared energy form a kind of value that algorithms can’t touch.
Stop Calling Your Hinge Matches ARR
Founders are stretching ARR definitions to the breaking point and Partner Lotti Siniscalco has thoughts. In her latest post, she breaks down the difference between ARR, CARR, pilots, and pipeline with relationship metaphors that make the distinctions impossible to forget. And she’s not alone: Jake chimed in, calling out the “math crimes” he’s seeing in today’s frothy market, where everything from one-time spend to pure pipeline somehow ends up labeled as ARR.
A timely reminder that precision isn’t optional.
Culture Outlasts Every Cycle
In a recent conversation with Hi Marley CEO Mike Greene, Founder and General Partner Gordon Ritter returned to a theme he’s seen repeated across decades of market shifts: culture outlives every trend. As Gordon told Greene, Hi Marley’s mission to make insurance more human isn’t just branding. It’s the operating system that attracts great people, earns customer loyalty, and creates an advantage no technology can automate.
Emergence in the Wild: Catch our partners in the news or at events
The New Reality of AI Valuations
The pace of fundraising in AI isn’t slowing and neither are the expectations. In a recent Business Insider piece on Perplexity’s rapid-fire rounds, General Partner Kevin Spain weighed in on how valuation pressure is reshaping the market. As he noted, when comparable companies raise at increasingly aggressive prices, those benchmarks quickly become the default expectation for founders and investors alike.
Emergence Recognized Among Top-Performing VC Funds Twice
In a recent analysis from Brex’s Shai Goldman, only 86 venture funds out of 2,400 with reported data have ever achieved 5×+ DPI. Shai highlighted the full list ranked by fund size, and Emergence appears on it not once, but twice.
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