As AI technology and systems like ChatGPT advance, the way venture capitalists think about investing in crops is changing.
Investor Leah Solivan, founder of freelance marketplace TaskRabbit, which sold to Ikea in 2017, has been working as a venture capitalist for the past eight years. He is currently working with startups building AI products as a general partner at Fuel Capital’s growth fund.
The process of building an AI company is “extremely expensive,” he said.
Leah Sullivan. (Photo by Chance Yeh/WireImage)
“[AI] it’s a big game-changing technology, but the cost is still too high to introduce something,” Solivan told entrepreneur Jeff Berman last week.
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AI models can take more than $100 million to develop, according to Anthropic CEO Dario Amodei.
Solivan says the cost of AI is changing when a small, early-stage fund like Fuel Capital invests. Big industry players like Microsoft and Nvidia, which have invested billions of dollars in AI companies, can afford expensive AI startups — but smaller, early-stage funds may not see the return on investment they’re looking for.
So small funds may strategically choose to pass on AI startups because of rising prices, even if those startups are making cutting-edge technology.
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“It’s like when we were looking at hardware companies and we were like whoa this is going to take too much money, the ROI on our investment, the math doesn’t work for our wallet,” Solivan explained. “You need really deep pockets to be successful. I think it’s very difficult with small funds to play here.”
By 2023, AI was one of the leading growth industries for unicorns, or startups with a valuation of billions of dollars.
AI was also the sector with the most funding last year, with AI startups collectively raising $50 billion, despite a tough year overall for startup fundraising.
Related: ChatGPT Writes Lots of Job Applications, But Companies Are Catching Up Fast. Here is the Method.
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