Artificial intelligence (AI) startups had a rollercoaster year in 2023. There was a surge in the use of AI tools, funding rounds at 2021 valuations, notable shutdowns, and high-profile controversies involving companies like OpenAI and individuals like Sam Altman. Looking ahead to 2024, the future of AI startups remains uncertain. However, insights from over 40 investors shed light on the potential trajectory of AI investing in the coming year.
Key Takeaway
Investors are optimistic about the future of AI investing in 2024, foreseeing a shift towards more specialized and sustainable AI startups, particularly in verticalized applications.
Investor Sentiments for 2024
- Continued Swell of Funding
- Moving Past Initial Hype Cycle
- Focus on More Verticalized AI Startups
Most investors are foreseeing a continuation of the current surge in funding for AI startups. However, they are optimistic about the industry moving beyond its initial hype cycle and transitioning towards more sustainable and robust businesses. Additionally, there is anticipation for the emergence of a second wave of AI startups that are more specialized and focused on specific sectors. These startups are expected to deviate from merely building layers on top of existing technologies from companies like OpenAI and Google.
Opportunities in Verticalized AI
Lisa Wu, a partner at Norwest Venture Partners, highlights the attractiveness of opportunities in verticalized AI for the year. She predicts that there may be lower investment risk in these startups compared to others, as they are less likely to be replicated by established companies such as Microsoft and Google. Wu emphasizes the potential of AI applications with deep knowledge of end-user workflows and access to industry-specific training data, which can enhance the productivity of employees and teams in various sectors. For instance, she envisions that law firms harnessing AI effectively could offer their services at a lower cost, with higher efficiency, and increased chances of favorable outcomes in litigation.
