Artificial intelligence (AI) has huge potential to solve many of the world’s problems; from tackling the ongoing coronavirus pandemic to mitigating the risks of climate change, AI could just provide the answers to some of our most important questions.
Reflecting AI’s position as one of the most promising emerging technologies, investors have been eager to back innovative early stage businesses in this space. Relative to other emerging technologies like robotics and the Internet of Things (IoT), AI companies were the leading investment category globally in 2019, securing over $23 billion in financing.
The growing investment in the field is promising, but if we are to truly release the potential of AI, we must pay more attention to properly supporting the teams who are developing the actual technology.
This necessarily involves separating real AI businesses from those who adopt the term for financial gain (a 2019 report from MMC Ventures revealed that two-fifths of Europe’s ‘AI startups’ do not actually use any AI programs in their products). Conflating the terms ‘AI company’ and, for instance, ‘software company’, risks setting the industry back and denying funding for those that are doing genuinely ground-breaking things in this sector.
Clearly, we must work hard to identify the right AI businesses worthy of support. But that’s just the first step: effectively nurturing AI startups takes a lot more than simply investing money into the concept.
Mentorship is key
Many driven young startups have a powerful vision yet are hindered by a lack of hands-on experience and business nous.
That’s why taking a financial punt on daring ideas is only the first step forward. While we cannot downplay the importance of having the necessary capital to jumpstart a business and develop the product, there are other, equally important, factors that must be recognized.
Early stage companies must overcome various growing pains – and this is true across the board, not just amongst next-gen tech startups. This includes everything from creating and refining the commercial model, to identifying early adopters and building out the product beyond the startup’s initial ideas.
Indeed, CB Insights suggests that the top reason that startups fail is that there is no market need for the product: this was the case in a whopping 42% of cases analyzed. So, while a founder might have a promising concept in mind, they often need help to convert that into a product that people will actually want to buy.
Meanwhile, another common reason for startup failures (as cited by the CB Insights study) is the lack of an effective business model. Most failed founders surveyed agreed that “staying wedded to a single channel or failing to find ways to make money at scale left [them] unable to capitalize on any traction gained”.
Startups are – and should be – often on the lookout for third party input and experienced teams that can help them scale. As well as seeking investment, they need mentors who can work closely with them at both a strategic and operational level across all key elements of the business. This includes assembling the right team of people to ensure there are no gaps in critical business areas; whether this is technical expertise or sales proficiency. An outside opinion can help teams onboard people with the right skills and experience needed to successfully scale the business.
Ultimately, effectively fostering innovation involves providing technical and commercial skills, as well as experience, to small young teams who may not have it.
How Fountech.Ventures can help
Fountech.Ventures’ business model reflects the challenges that many ambitious startups encounter in the initial stages of their journey. Rather than simply injecting cash into the business, the team immerses themselves as corporate co-founders across numerous fronts, offering in-house expertise to bring a vision to life.
In addition to the ongoing corporate co-founder model, Fountech.Ventures also provides a range of tools that will give teams the knowledge and skills they need to grow the business. These include regular peer-to-peer workshops, pitching events, technology lunch-and-learns, IP workshops, finance planning workshops and more.
If you want to learn more about how Foutench.Ventures sets their portfolio companies up for commercial success, then please get in touch.