Artificial intelligence is skewing the venture capital market. Not the tech itself, but the billions flooding into foundational model makers and their brethren. By the numbers: AI companies raised $12.4 billion in May, according to CrunchBase, representing a whopping 40% of the global total. It’s as if much of the industry returned to pre-pandemic norms, while the rest doubled down on building unicorn stables. AI is a sure bet, in terms of where tech innovation is heading. AI startups are not, no matter how well funded. Some of that’s just the fickle nature of all startups, in that most of them either fail outright or fail to live up to investor expectations.
But some is specific to this particular boom. Partially because of uncertain business models, and partially because the incumbents aren’t being caught flat-footed (as usually happens in major platform shifts). There are two basic arguments for why so many are investing so much, despite the significant risks. True believers. These are the VCs who are convinced they’ve identified the startup that eventually will expand the Magnificent Seven into the Excellent Eight.
Halo hopefuls. These are the VCs who hope they’re holding a winning lottery ticket, but whose primary motivation is being associated with those companies — for the sake of securing future access to other deals. Plus, a recognition that the best way to really learn an industry is via direct exposure. It will become harder and harder to separate out “AI startups” from all startups, much as the term “internet company” lost all meaning in the early aughts. And that may also become true for VC industry returns.
Full story : For venture capitalists, it’s about AI and then everything else.
