The world does not need any more AI productivity tools, according to Northzone, the European venture capital firm founded in 1996 and an early backer of Spotify, which says it has evaluated such tools running well into triple digits in the past 12 months alone and believes the vast majority of them are destined for the graveyard.

The firm frames the current moment as the most exponential cycle of innovation—and therefore value creation—the world has ever seen. AI has delivered tremendous productivity increases at an unprecedented rate of change, making this both one of the most exciting and one of the hardest times to be a venture investor. Public thesis essays of this kind also function as a market signal: when an established firm spells out where it will and will not deploy capital, founders and co-investors read it as a map of where money is heading.

The rise of AI productivity tools

The years 2023 and 2024 saw a mind-boggling rise in AI productivity tools. Vibe coding—a term coined in early 2025 by AI researcher Andrej Karpathy to describe building software by prompting AI in plain language—became real with Lovable, lawyers harnessed Harvey, doctors slashed admin with the likes of Abridge, and even the common office worker became far smarter with note-taking assistants such as Granola. These products deliver as advertised, Northzone acknowledges: they search, they summarize, they automate, they save time, and they capture very useful context in the process, playing across both the first and second phases of the AI development cycle.

The list of productivity tools, both horizontal and vertical, runs into the many hundreds today. The boom was built atop rapidly improving foundation models from OpenAI, Anthropic, and Google, and critics have dismissed much of the category since ChatGPT's debut as 'wrappers'—thin layers over other companies' models whose value can evaporate when the underlying models improve. At a moment when in-silico AI modeling stands on the precipice of discovering new drugs, AI Notetaker #25 is not only not needed, it is unlikely to survive as a standalone business, the firm argues.

Who survives

Over 50 years ago, Charlie Munger convinced his best friend, Warren Buffett, to ditch the proverbial cheap cigar butts in favor of buying durable, high-quality businesses centered around their economic moat—a shift later epitomized by Berkshire Hathaway's 1972 purchase of See's Candies. Ironically, Northzone notes, these moats are today the weakest they have ever been—specifically in AI-native businesses.

The pace of innovation that AI has brought about is unprecedented, as is the economic return. Yet the longevity of this economic return is the most unclear it has ever been. Northzone's analysis estimates that around $1 trillion in net new AI ecosystem revenue was added since the launch of ChatGPT in November 2022—an unprecedented rate. Meanwhile, the quality of that revenue is amongst the riskiest it has ever been. AI models are under existential threat from open-source; incumbent chip manufacturers from new entrants; applications from the models themselves—and the weakest of those applications are the plain-Jane productivity tools.

AI applications collectively are today pushing an estimated $150–200 billion in ARR (annual recurring revenue), according to Northzone's analysis. By far the largest and most mature vertical within this is AI coding, at 20–30% of these revenues, which hosts amongst the most sophisticated class of AI application products. That vertical, too, evolved from a basic productivity tool—GitHub Copilot, launched in 2021 and arguably the first real vertical AI application. From there it became a system of action—a Cursor, a Claude Code, a Codex, and eventually a Cognition—capable of doing hours' worth of human work independently. Now come full-blown autonomous systems of work (Blitzy, Factory, and others) that can ingest hundreds of millions of lines of code, understand objectives, and independently ideate, create, and deliver solutions over weeks of autonomous work. In fact, very early signs of recursive superintelligence are already appearing, the piece states.

The evolution of the coding vertical is unlikely to be unique. Most, if not all, verticals will follow a similar trajectory. AI doctors and AI lawyers will deliver autonomous value superior to any single human being. They might come from companies that do not exist today, or perhaps some of the best of the aforementioned productivity tools will use their head start—proprietary data sets and embedded workflow—to evolve into these.

Northzone's investments in companies like Tandem Health are already showing this evolution from productivity tool to a true system of action. Others, like XBOW or Blitzy, are true autonomous systems of work from day one. So, a few will survive and thrive—the rest will perish.

Where the world is headed

This does not mean the firm will stop funding productivity tools altogether. It does mean Northzone will only focus on those that are creating meaningful new value for the world.

If the last 24 months of AI were defined by efficiency and productivity increases, the next 12 will be defined by innovation. Investment will likely flow increasingly toward AI for science—fueling the discovery of new drugs and materials—while autonomous AI for defense makes the world safer for the vast majority of the population, despite the feeling of the converse. Physical AI might be larger than all of digital AI put together and will have a lasting impact on human behavior like no other.

By definition, innovation is almost impossible to predict precisely, so perhaps the most meaningful developments to come lie beyond those listed here. Northzone spent almost two years examining what a truly autonomous system of work would look like, and for more than a year the firm sat on this then-contrarian thesis, not actively deploying capital even as productivity tools drew vast sums of it. The technology simply did not exist.

But since the beginning of 2026, Northzone has actively led rounds in excess of several hundreds of millions of dollars, as a convergence of vast foundational intelligence, deep reasoning, and early recursive learning loops saw the arrival of these systems, capable of acting autonomously over long horizons without being told what to do next. A tool that requires human supervision simply cannot compete with a product that completes months of work in a weekend, the piece argues.

Crudely defined, AGI—artificial general intelligence—is the ability of AI to navigate ambiguity, form hypotheses, test them, hit dead ends, iterate to find a solution, execute, and deliver value, all without any human intervention. That is the next frontier, and the new standard for investment.

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