VCs are skeptical whether the investments in AI startups would fetch satisfactory returns, despite acknowledging the untapped potential and AI's ability to impact many other sectors.
Emergence Capital's founder Gordon Ritter is one of the skeptics taking a measured approach to investing in AI startups.
- The recent influx of generative AI startups has piqued the interest of investors, who appear to be pouring money into the sector despite just emerging from a period of inflated valuations and free-flowing money.
- An undisclosed veteran investor told the FT that "[AI] companies are extremely overvalued, and the only justifiable investment thesis is to get in incredibly early. Otherwise, you're only buying in because of FOMO."
- Andreessen Horowitz led over $200M in funding into Character.ai, while Microsoft committed $10B to OpenAI.
- AI startups require substantial capital to build machine learning systems and source computing power.
- Many investors are holding out in hopes of backing a "killer app with clear commercial potential."
