Investors in the AI industry are chasing ideas that are already years ahead of current market understanding, according to Jenny Xiao, cofounder of Leonis Capital and a former researcher at OpenAI. Speaking on the Fortune Magazine podcast, Xiao highlighted a significant lag between cutting-edge AI research and the broader investment community’s awareness. “There is a massive disconnect between what researchers are seeing and what investors are seeing,” she said. She explained that the breakthroughs discussed at top AI conferences are often 3 to 5 years behind the latest thinking in labs and academic circles. “We are so behind the technical frontier, and that’s the gap I really want to bridge,” she added. Xiao, who left a Ph.D. program in economics and AI to join OpenAI, founded Leonis Capital in 2021 with the mission of connecting deep technical AI research with venture capital. Her goal is to close the gap between innovation and investment by building a new kind of VC—one that understands both the science and the business of AI. She emphasized that the current AI landscape demands a new generation of founders and investors. Unlike past tech waves, such as the SaaS boom, which relied on stable, predictable technology stacks, AI is evolving at an unpredictable pace. “With AI, there needs to be a new generation of founders. There needs to be a new generation of VCs,” she said. To succeed, investors must be as technically fluent as the founders they back. “It’s also the first time investors need to be able to provide financial support to both the market and the technology,” she noted. This means understanding not just business models, but the nuances of model training, architecture, and research pipelines. Xiao also warned against viewing AI progress through a linear lens. “AI progress isn’t linear,” she said. Instead, advancements happen in bursts—what she calls “lumps.” This means that sudden leaps in capability can occur, followed by periods of slower development. As a result, questions about whether AI progress is slowing down or speeding up miss the point. “It’s neither of those two extremes,” she said. “It’s somewhere in between.” Leonis Capital has not yet responded to a request for comment from Business Insider.