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Right here’s how we raised a Sequence B for our AI startup throughout a downturn

Elevating a Sequence B isn’t simple, and it’s change into exceptionally troublesome within the final yr because the enterprise spigot slowed to a trickle. Nevertheless it’s a special story for those who’re an AI startup, proper? In any case, VCs are throwing money on the AI house.

Not so quick.

Already, the headline-grabbing funding rounds for generative AI firms are starting to sluggish, and with virtually each startup calling itself an “AI firm,” it is going to change into harder for true AI startups to face out.

For founders making an attempt to lift a Sequence B for his or her AI startups within the subsequent six to 12 months, a more difficult fundraising setting possible awaits.

So what can AI founders do to lift a Sequence B when AI is all over the place? As a founder who raised a $40 million Series B from high buyers in August final yr, I can share just a few methods that labored for us.

Convey the “why” behind AI

You might really feel like your startup is all about AI, however is it actually? Numerous startups are searching for methods to include AI into their merchandise. There’s nothing mistaken with including AI options, but when that’s all you’re doing, then claiming to be an AI startup only for the sake of it is going to diminish your credibility.

For founders making an attempt to lift a Sequence B for his or her AI startups within the subsequent six to 12 months, a more difficult fundraising setting possible awaits.

If AI is important to your resolution, you need to be ready to clarify the measurable impression it has in your product providing. Do your fashions generate just a few factors of enchancment over the perfect accessible baseline, or does it symbolize a big step-function leap from the established order?

You’ll be able to convey AI’s impression in your startup in a number of methods, together with quantitative metrics like mannequin efficiency, enterprise worth measures like return on funding (ROI) and whole value of possession (TCO), and qualitative proof factors like case research and success tales.

However impression alone just isn’t sufficient. OpenAI’s domination of the AI house poses a menace to numerous startups, significantly those who act as wrappers to public fashions like GPT-4. In right this moment’s hyper-competitive panorama, it’s vital to articulate how your startup stands other than main gamers.

As an illustration, what moats does your enterprise have? Do you’ve gotten a invaluable, proprietary dataset? A singular enterprise workflow? Area experience? These are all important methods to speak your startup’s aggressive edge.

Set up ironclad credibility with buyers

After being inundated with AI startups, buyers have change into savvier about figuring out what’s and what isn’t AI. With the accessibility of enormous language fashions (LLMs), constructing an “AI startup” has change into a lot simpler and cheaper.