"Don't Even Look at the Business Plan" AI Startup Investments Surge Amid ChatGPT Craze

Despite the rapid interest rate hikes and the fallout from the Silicon Valley Bank (SVB) collapse causing a kind of downturn in the U.S. Silicon Valley venture capital ecosystem, only artificial intelligence (AI) startups are enjoying a boom. Thanks to the so-called 'ChatGPT' craze, investor funds are pouring into companies leading with generative AI technologies. However, most of these companies have been found to be newly established startups without even verified business plans.

The Wall Street Journal (WSJ) reported on the 8th (local time), citing research firm PitchBook, that venture investments in companies related to generative AI technology are expected to increase to several times last year's $4.5 billion. Although U.S. venture capital funding in the first quarter fell sharply by 55% to $37 billion, investments related to AI remain active, according to PitchBook's analysis.

This AI boom has accelerated since the launch of OpenAI's ChatGPT. A representative investment case is Microsoft (MS) investing $10 billion in OpenAI earlier this year. WSJ reported that at an event hosted over two days in March by venture capitalist Ron Conway for companies supported by SV Angel, former President Barack Obama and OpenAI CEO Sam Altman participated, showing a scene akin to a golden age of venture investment. PitchBook estimates that the AI application market will grow from $43 billion this year to $98 billion by 2026.

[Image source=Reuters Yonhap News]

News of venture investments or imminent investments continues to come in. A source revealed that voice AI startup Eleven Labs recently received a valuation of $100 million from Andreessen Horowitz, a leading Silicon Valley venture capital firm. AI startup Humane, founded by former Apple executives, also secured $100 million to develop AI-based wearable devices. AI startup Character.AI, founded by two former Google employees, raised $150 million from investors including CEO Altman.

In particular, due to the ChatGPT craze, large-scale funds are flowing into AI startups even when their revenue models or business plans are not yet clear. WSJ conveyed the atmosphere, stating, "Companies and investors hope generative AI will transform business activities ranging from film production to services and grocery delivery," adding, "The sudden influx of capital has intensified competition, with AI researchers lacking management experience also launching startups."

In the case of Nikki Parmar and Ashish Baswani, former Google AI researchers and co-authors of a paper credited with paving the way for generative AI technology, they secured over $50 million in valuation funds just weeks after founding their independent startup earlier this year. WSJ added that they attracted investor interest even before having corporate clients, business plans, or missions.

Expectations and concerns are mixed amid the investment frenzy surrounding AI startups. Matt Turk, an AI-focused investor at New York-based venture capital firm FirstMark, said, "(This is) an undeniable major inflection point," and added, "Great products and companies will emerge." However, he cautioned, "Like previous hype cycles, the majority will not end well," pointing out, "The market cannot suddenly support millions of companies with immature ideas. It feels like a gold rush."

This content was produced with the assistance of AI translation services.