This was a breakthrough year in terms of financing for artificial intelligence corporations. Venture financing reached $99.6 billion through mid-December, up 80% from a year earlier, based on Crunchbase data. Almost one third of those funds went to model corporations.
The remaining two-thirds of the funds went to sectors affected by the latest models. In addition to hardware and data provision to administer and operate AI, leading sectors included autonomous driving, healthcare, robotics, skilled services and marketing and sales, based on Crunchbase data.
As billions of dollars flow into these latest technologies, we spoke to greater than half a dozen early- and late-stage investors this year to seek out out what their expectations are when it involves artificial intelligence.
We’ve heard that the majority of those corporations’ latest investments are focused on artificial intelligence, much like cloud computing in the previous era. Scale enterprise partners‘ Rory O’Driscoll estimated that about 80% of the company’s latest investments this year were in artificial intelligence.
Artificial intelligence used
In 2023, AI-related issues dominated the discussion – the data infrastructure corporations that are expected to configure and manage these models. In 2024, many investors – although still investing in infrastructure – have noticeably moved towards considering about artificial intelligence applications that significantly impact the sector.
“I think we’ll make real money by seeing which applications get done first,” O’Driscoll said. “Part of that is understanding how companies evaluate success.”
And by extension, “how willing are they to live with the intrinsically probabilistic nature of AI – in other words, how catastrophic is failure?”
“There are a whole range of human tasks that AI can now perform at some level of achievement, and I think a big part of success will be judging when it’s good enough and when it’s not good enough,” O’Driscoll said. He invested in corporations using artificial intelligence Regie.ai, Your, Benign artificial intelligence AND Clarity.
Powered by artificial intelligence
The concern for accuracy was echoed by Happy 1 general partner Sundeep Peechuwho predicted that “many services will operate semi-automatically and with human intervention at the very end, which will fundamentally increase the level of supervision.”
Peechu said in an interview that multimodal AI might be next. This technology integrates text, image, audio and video or a combination of them into a single interface.
A brand new kind of fund
Menlo Ventures cooperated with Anthropicone of the largest generative AI startups in the world, creating a $100 million AI fund called Anthology invest in early-stage start-ups using artificial intelligence.
“People need to be a a part of Anthropic now. “It’s a hot game,” Tim Tully– a partner at Menlo Ventures told us in an interview.
Startups in the fund receive an allocation of free credits for Anthropic models — and even perhaps more precious, Tully said, is access to Anthropic leadership.
Anthology Fund he announced that he had done it 18 investmentsso far, eight of them still remain hidden.
Increased productivity
Artificial intelligence is not a function. It’s not even a sector if you ask me Dharmesh Thakkergeneral partner in a renowned enterprise firm Battery ventures.
“I look at AI as a fabric,” Thakker told us.
“Right before our eyes, we are seeing companies growing 20-30% now able to break even on cash flow almost immediately or within 12 months by applying generative AI in sales and marketing, R&D, recruiting and other areas activities,” Thakker said. “So we see this innovation fully impacting productivity in the technology sector.”
This has a significant impact on one other large cost center, research and development. “With Copilot, you possibly can generate results from high-priced software engineers earning $300,000 to $400,000 a year. You don’t need as many software engineers,” Thakker said.
He added that in other sectors, akin to health care, the impact could possibly be much deeper.
Increased revenues
In software, more dollars are spent on services that integrate technology solutions than on products, Cancer Gargpartner in Bain’s capital ventures– he said in our conversation with him.
Generative AI creates the opportunity to rework service revenue into product revenue.
“These services take data from one place, shape it in different ways and put it in another place,” he said, citing Unstructured as an example. “Models are really good at this.”
AI application corporations are beginning to generate real revenue, he says Matt Carbonaramanaging director w Citi venturesthe investment arm of the banking giant Citigroup.
“They are ready and just easier. Enterprises are still learning. It’s a new skill set,” Carbonara told us. “How do we implement this? How to achieve the desired accuracy? It’s an iterative process, unlike someone coming to you with a baked cake.”
Going vertically
SaaS has been the dominant technology force for the past 20 years, but is now giving approach to artificial intelligence, several investors told us.
“We have literally solved most of the problems that this generation of technology could solve,” he said Greg Sandsfounder Costanoy’s ventures.
The company believes that generative AI has now opened up vertical opportunities that will have been too small in the past, Sands told us.
“He has always hit on vertical SaaS: it is a smaller market to address because you are limiting yourself to one industry rather than building something that can be applied to every industry.” John Cowgillgeneral partner at Costanoa, said in our interview.
The company looks closely at each industry to know how big it may possibly turn out to be as artificial intelligence develops.
The agent is coming
Conversation continues agentic artificial intelligence it’s lower than six months old, but it shows the rise of recent, native AI corporations.
“The real value of AI comes when you can have an end-to-end workflow,” Cowgill said. “This is the idea of an agent that steps away from using AI, points to something and says, ‘search this with AI, summarize with AI’ — to have a task to do with AI. Getting agents to work is extremely difficult.”
It takes a decade
While the value of AI investments in 2024 will increase in comparison with 2023, it would take more investment cycles to completely realize the AI revolution.
“There will probably be a period in the next two or three years where we will all be a little disappointed with the traction and there will be a slight correction,” O’Driscoll said. But “walking away 10 years from now, no one will be building software without AI at its core.”