The First Thing Your Startup Can Do With AI Is Become Instantly More Attractive to VCs Venture capitalists are eager to invest in startups making innovative use of artificial intelligence.
By Rahul Varshneya Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
AI has come a long way since the virtual assistant who reliably dialed the wrong numbers in your contact list. Thanks to a continuing stream of technological advances producing more promising capabilities than ever, AI-enabled products have seen venture capital investments in excess of $2 billion since 2011.
Part of the increase in interest stems from the massive amounts of data that the world's more than 2 billion smartphone users generate. The number of insights that can be gleaned from this population would rock the worlds of marketers from only a few years ago, but truly unlocking this quantity of information requires processing power that far exceeds what humans are capable of.
Related: Why Tech Companies Are Pumping Money Into Artificial Intelligence
It would take human beings many lifetimes to merely organize the data generated by billions of people -- and many more to draw useful conclusions from it. Enter AI and the capacity for deep learning, whereby machines can teach themselves to learn over time and improve their effectiveness.
AI technology can be prohibitively expensive to implement, especially if you have a young startup with limited cash. But because AI is becoming more prevalent in the startup world, VC funding is at an all-time high. AI-enabled startups obtained about $1.2 billion in funding in 2016, and that number continues to rise.
If your startup is looking to get investors involved, there are a few ways to catch their attention:
1. Determine how AI can revolutionize your product.
Even if AI hasn't made a visible impact on your industry yet, it's only a matter of time before every industry is affected by the new technology.
Some of the more obvious areas for AI -- such as the self-driving car industry and biotechnology -- are currently seeing the biggest investments from venture capitalists. But other spheres, such as healthcare, are also beginning to see an increase in AI applications. As big data becomes ubiquitous, AI will impact a broad spectrum of industries, from finance to renewable energy.
Mark Minevich, founder of Going Global Ventures and an expert in the growing impact of AI and tech investment, predicts that "AI is about to take us to an exponential new level of explosive growth. From driverless cars to robotic workers, the digital AI future is going to be here before you know it. ...AI will open our abilities to solving a new scale of problems and provide solutions for the betterment of humanity."
Figuring out creative new ways to solve some of these problems with AI will be key to attracting attention from venture capitalists who want big innovations.
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2. Know the strengths and weaknesses of your product before talking to investors.
Entrepreneurs are passionate people who believe in what they're doing. This enthusiasm is critical when it comes time to convince an investor to back your venture, but enthusiasm can't replace knowing as much as possible about your product.
Along with knowing every detail about your product, you should also be informed about your competition and your target market -- as well as how your product is different from everything else in the marketplace. The investor's job is to take a critical approach, so be sure you know your product's weaknesses, too. That way, when investors inevitably find the flaws, you'll already have a strong response planned.
3. Network with investors.
Target investors who are interested in your industry; if possible, have someone introduce you. Know your elevator pitch intimately, but be able to explain it without sounding robotic.
At the end of the day, VCs are investing in people, not technology. Face-to-face meetings are ideal, but because a slim chance at meeting an investor is better than none at all, don't dismiss cold emails. Before you hit "send," spend some time on your message, and check out resources that can help improve your odds, especially with angel investors.
4. Highlight your team.
From technical wizards to sales and marketing specialists, a diverse team of experts will give any investor extra confidence in your product's potential. Having specialists proves that others have already aligned themselves with your idea, and it demonstrates a certain wisdom when you're willing to rely on others for help.
Related: How to Prepare Employees to Work With AI
Good investors can also tell the difference between a solid startup and one with little substance that's been overly hyped by the media. To ensure that your company passes that test, it helps to have a strong team behind you. Patents (whether obtained or pending) and other proprietary information can also help prove your company's worth and potential, even if your numbers aren't the best.
AI is already changing industries, and its impact will only continue to grow. While incorporating AI into a business model may seem, in many respects, as if it's out of reach for a small startup, its enormous potential can help creative entrepreneurs command the attention of venture capitalists looking to invest in the newest, most innovative technology.
