Funding 101: What Investors Look For In AI Start-ups

Companies worldwide have woken up to AI’s potential and are busy incorporating AI into their configurations — be it on the security front, shop floors or product pipelines. AI and ML have become a fashion statement so much so that several start-ups claim AI/ML capabilities to attract investors or for bragging rights. More often than not, such claims turn out to be mere eyewash or a plot to trick investors or customers.

On the other hand, several tech start-ups come up with novel solutions to address real-world problems using AI. However, a lot of these companies have a hard time raising funds. 

Analytics India Magazine caught up with venture capitalists investing in AI and emerging technologies to understand what they look for when funding an AI company, and why some companies get rejected.

Is AI a silver bullet?

Since the technology is so promising, AI is now looked at to fill every gap or solve every problem that industries face. However, when tech investors decide to fund a start-up, they look for a pervasive problem and if AI is the best solution to solve it.

“We tend to like companies that use AI to solve a pervasive problem in any traditional industry with 10x differentiated technology,” said Manish Singhal, Founding Partner at Pi Ventures – an investment company with a vision to accelerate the development of AI start-ups in India. 

“We also say that we are an AI fund – but we are not looking for AI companies – what it means is that we are looking for companies which are solving large and global problems using disruptive AI. It is a means and not the end,” he added.

When deciding on funding an AI start-up, investors take a long view.

“There needs to be a real use case,” said Ninad Karpe, Partner at 100X.VC – a venture capital firm investing in AI and tech companies, “Founders with AI capabilities try to hammer any problem they can with it. There needs to be a real market – technology fit. We either see products that make life much easier for users or products that enable an option for users they didn’t have access to before.

Read more at: Funding 101: What Investors Look For In AI Start-ups

- 100X.VC Team

Published on: April 11, 2021