AI Startup Investing: Riskier?
Source: techcrunch.com
Investing in AI startups is both exciting and risky. Established companies like OpenAI, Microsoft, and Google are rapidly expanding, potentially overshadowing smaller businesses. Simultaneously, new startups are achieving growth stages faster than ever before. However, defining "growth stage" for AI startups is complex.
Jill Chase, a partner at CapitalG, mentioned at TechCrunch AI Sessions that some companies, only a year old, have reached significant annual recurring revenue and valuations. Despite seeming mature based on these metrics, they often lack essential infrastructure.
The Challenge of Rapid Growth
Chase finds the fast growth exciting but also notes concerns about high valuations for young companies in a rapidly changing landscape.
She stated, it's hard to know what future companies might emerge and outperform current investments. This makes growth investing confusing, according to Chase. She advises investors to assess the category and the founder's adaptability.
Cursor as an Example
Chase cited AI coding startup Cursor as a company that capitalized on AI code generation when it was viable. However, Cursor will need to adapt to maintain its advantage.
Chase anticipates the emergence of AI software engineers, which could make Cursor's current offerings less relevant. She said that Cursor must evolve its product to incorporate more powerful models in the future.