startup investment The market today is overcrowded, expensive and rapid-fire as venture capitalists work to preempt one another in hopes of pumping money into hot companies before their competitors. The AI startup market may be even hotter than the average technology niche.
This shouldn’t be surprising.
In the wake of the Microsoft-Nuance deal, the exchange noted that it would be reasonable to anticipate an even more active and competitive market for AI-powered startups. Our thesis was that after Redmond dropped about $20 billion for an AI company, there would be a new incentive for investors to invest in an AI focus or upstarts with a strong AI component; Exits, especially large transactions, are a way of increasing investor interest in related companies.
That hope is coming true. The investor exchange reported a fierce market for AI startups in recent days.
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But don’t assume that investors are falling over each other to fund companies betting on the future that may or may not come. According to a Signal AI survey of 1,000 C-level executives, nearly 92% thought companies should rely on AI to improve their decision-making processes. And 79% of respondents said that companies are already doing so.
The difference between the two numbers indicates that there is room in the market for more corporations to learn to lean on AI-powered software solutions, while the first metric addresses a vast total for startups building software built on the foundation of artificial intelligence. Defies the eligible market.
Now in the second quarter, we’re diving back into the AI startup market this morning, leaning on the notes of David Blumberg of Blumberg Capital, Glasswing Ventures’ Rudina Cesaric, Atomico’s Ben Bloom, and Jocelyn Goldfein of Zeta Venture Partners. We’ll start by looking at recent venture capital data about AI startups and what VCs are seeing in both the US and European markets before delving into applied AI versus “core” AI – and in what context VCs still care. Can do the latter.
hot, expensive, overcrowded
The exit market for AI startups is much more than just the big Microsoft-Nunes deal. CB Insights reports that four of the five largest US tech companies have so far bought a dozen or more AI-focused startups, with Apple leading the pack with 29 such transactions.