How AI Ventures Spend Their Capital

AI startups are putting their cash into . . . AI startups.

What’s new: Young AI companies flush with venture capital are purchasing startups to expand the range of services they can offer, The Wall Street Journal reported.

Behind the news: All told, investors are spending more than ever on AI. Private investments in AI more than doubled to $93 billion in 2021 from $42 billion in 2019, according to the Stanford AI Index. However, they’re also becoming choosier about where they put their money. The number of newly funded AI companies worldwide fell from 1,200 to 746 between 2018 and 2021.

Why it matters: AI continues to be hot in the startup world — so hot that startups themselves want more of it. The current wave of purchases suggests that startups not only want to expand their AI holdings, they consider purchasing AI companies a strategic way to broaden their markets.

We’re thinking: Ultimately, young companies have to make money by creating long-term value, but the route may not be direct. For instance, we’ve seen self-driving car startups that have little in the way of products or revenue thrive by serving other self-driving car startups. This is part of the value of venture capital: It gives companies the time and resources they need to (hopefully) create massive value.

1 Like

Nice thoughts! Sometimes the problem is that entrepreneurs are led by dreams not visions. The dream is just imagination and vision is how far can you see into existence. From what I have noticed many start-ups are founded by people who have no knowledge on subject-matter and their expectations are unrealistic. This is a big issue and ultimately a major determining factor of the success of the startup. The crux of success is dependent on who develops the service and because some have only dreams in their portfolio they might start acquiring other startups that have developed the service.

1 Like