Venture capitalists are paying high premiums to invest in Artificial Intelligence (AI) startups, despite little to no public revenue. The success of OpenAI’s ChatGPT has fueled competition among investors, leading to inflated valuations in the industry, with OpenAI currently valued at $27 billion. The rush to invest has resulted in a strong premium, causing concern about whether companies will move towards revenue generation. However, some startups have already shown tremendous growth, leading to justification for premium investments. The funds dedicated to emerging generative AI startups, such as Adept, Inflection AI, Pinecone and Runway, have been on the rise, with investments totaling $1.7 billion in Q1 2023.
In Europe, potential investment targets are increasing in popularity with investors hoping to find a European equivalent of OpenAI. French startup Mistral, and German startup Aleph Alpha, founded by former research scientists from Google DeepMind and Facebook-owner Meta respectively, have already been in discussions to raise significant funding.
While AI startup investments slightly dropped in 2022, the funding picked up after the emergence of ChatGPT at the end of last year. Investors are starting to move away from generalist AI to specific applications where risks to humanity are at a minimum. With Europe accounting for 15% of AI journal publications compared to the US’ 10%, AlbionVC partner David Grimm highlights a significant opportunity for European startups focusing on defense, national security, and tech sovereignty.
However, the threat to humanity remains a concern for investors. To prevent investing in AI that could pose a threat to humanity, investors are prioritizing specific applications of AI as opposed to generalist use cases.
