Who is really building AI – and who is just pretending?
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A contribution from John Lange. Lange is a founding partner of the venture capital fund AI.FUND, which aims to develop the potential of artificial intelligence for entrepreneurial investors.

AI technology has arrived in reality. Digitalization provides the database with which AI models can be trained. By applying these models, processes can be automated, content generated, products and services optimized, robots controlled and predictions made. The result is significant productivity gains. AI technologies have an exponential effect, meaning they achieve three, five or up to ten times better results and are constantly learning. Startups that use artificial intelligence specifically to solve a problem and generate customer benefit therefore have the potential to develop significantly more successfully than those that do not do this.

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AI startups achieve higher valuations

Since the long-term growth prospects for AI startups are higher, as outlined above, AI startups are particularly attractive for investors. Accordingly, they are prepared to pay valuation premiums. According to a new analysis by CB Insights, depending on the stage, AI startups achieve valuation premiums of +21 percent (for seed financing) to +59 percent (for Series B financing) compared to non-AI startups.

However, the greater attractiveness among investors can tempt founders to stick an AI label on themselves, be it in the name (xy.ai) or in the slogan, without actually using AI at the core of the service offering. Suddenly every startup seems to be an AI startup. But the use of ChatGPT alone does not turn a young company into an AI startup.

This question about the difference arises especially among startups that develop specific applications. For those who develop parts of the infrastructure required for AI or AI models such as large language models, the matter is clearer. However, these usually require much more development time and higher investments. There are correspondingly fewer startups in this area. At the application level, the choice is significantly larger. There are over 6,000 AI startups in Europe alone.

8 factors by which you can recognize a “real” AI startup

Source: https://www.businessinsider.de/gruenderszene/business/ki-startups-so-finden-investoren-die-besten-investments/

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