Skip to main content

There has been a lot of chatter about AI in the past year, as you can probably tell. Being an investor, I am being asked a lot; what is your position on AI investments? I suspect that it comes from FOMO, which is the curse and the enemy of early-stage investments returns. It’s currently a world wide gambling casino with other people’s money by venture funds, with a business case that is stated  ‘it’s a hot space and everybody is investing in it’. 

Although there is no clear and definite answer, I will answer it this way: it is definitely the biggest technology breakthrough in modern time, but, there is a big but.

Let me explain. Given the nature of Intelligence, there are risks, especially if it will fall in the wrong hands, and it will, just a  matter of time. (Some say it already has).

Let’s look back, in the early days of the Internet there was a lot of hype, very similar to what we got noticed around Crypto, and similar to what you see today around AI. The internet did not become what it is today until the TCP/IP protocol was created and widely adopted. 

Given the inherent potential risk of wrong use of AI, many governments, including some noticeable technologists in the AI space such as Elon Musk, Wozniak, Bill Gates and Sam Altman the CEO of OpenAI himself, are calling for regulation of the use cases of AI. It is rightfully so. 

We already have strong suspicions that at least the US government intends to put AI Regulation

on use in Medical, Autonomous Mobility, Aviation, Education and other areas that put human life at risk. So the biggest question is; what such regulations will look like?

So are we waiting for the regulation to come, or will someone create the “AI Universal Protocol” or some other set of agreed upon set of tools? At this point, the AI tech market remains like the California Gold Rush. Everyone is buying land, yet only few will find the gold trail.

Although as an investor, I do not have the crystal ball, my approach will be to take it with a grain of salt. It was a Blue Ocean just a few years back. Now it is a highly concentrated Red Ocean  and the competitive landscape becomes tighter and  tighter and fearsome  and the batting average going against investors. 

We already know that most likely it will be the game of the bigger players such as Google, Microsoft, Apple, Oracle etc.. which will own the “River”, the delivery platforms. So the question is will smaller companies be able to compete or will the entire AI startup community be the marketplace for the large players to shop? Or will we see the next big thing coming out of nowhere?

However, in general, in my view there are three primary types of AI startups:

  1. Feature-based AI startups: These companies focus on providing specific AI features or functionalities, often tailored to a particular audience. They might offer solutions for natural language processing, image recognition, and the ‘ChatGPT” community. 
  2. Platform-based AI startups: These companies offer more comprehensive AI platforms that enable businesses to build, deploy, and manage multiple AI applications across various use cases. These platforms typically provide tools, libraries, and APIs for developing custom AI solutions and integrating them into existing systems.
  3. Industry -based AI startups: These companies offer an AI platform that is designed to serve a specific industry vertical that solves a particular problem most times having a single use case more likely on an enterprise level. Such as AIaaS – AI as a service model.

It’s important to note that the AI startup ecosystem is continuously growing and evolving, yet there are more and more Feature -based AI startups simply because it is easy and fast and you’re essentially “sitting” on the large platform like OpenAI etc.. and they will come and go like mushrooms after the rains. The Platform-based AI and Industry – based AI will take longer to develop, require more capital and, if successful, will stay longer. 

Do not get me wrong, we are looking to invest in AI related startups, it is the tech big thing now phenomenon, yet not all AI startups are created equal. There are the ones that are trying to ride the wave of the hype and there are the ones that are developing and applying AI to advance and solve real problems in order to elevate the quality of life.  

Separating one from the other is the challenge for most investors, due to the alarming number of so-called AI startups entering the market, daily. 

The big question: What will be the success ratio of all AI startup companies? 300:1, 1000:1 or 5000:1 or even higher?

So what do you say?  comments are welcome!