🚨 Hustle Fund comes to Miami

On January 16, Elizabeth Yin is heading to Miami to interview Lisa Muccio. Lisa is the co-founder of The Pitch podcast, and GP at The Pitch Fund. She’s screened thousands of founder pitches, and her ability to pick winners is remarkable.

This is part of our event series, Founder Friends. And even though Small Bets is an investor-focused publication, we thought you might like this event.

So if you’re in Miami on Jan. 16, join us for a night of dynamic and enlightening storytelling. No charge to attend, just RSVP.

Today's topic: investing in AI

Happy New Year! 2024 has come and gone, and venture capitalists are still obsessed with AI. So I guess it's not a passing trend.

You can't scroll through TechCrunch without seeing an AI startup raising a big round at a frothy valuation. No wonder founders are slapping an "AI-powered" label on their pitch decks.

But the fundraising landscape is still choppy. So unless you're a serial entrepreneur, raising any money – let alone at a juicy valuation – is still really, really hard.

This doesn't seem to be stopping the tidal wave of AI startups, though. The market is saturated in a big way, with new players popping up practically every day.

And no matter which category of AI you're talking about, there are already some major incumbents.

We've got foundational AI giants like OpenAI and Perplexity. Generative AI companies like Jasper and Midjourney. And task-driven AI tools for sales and marketing, like Apollo and Albert.ai.

It's a jungle out there for newcomers. But here's the plot twist:

The appetite for AI tools is ravenous. Users of all shapes and sizes are clamoring for AI products. That's why there are so many players in this space. The opportunity is huge... if you can win.

I mean, who doesn't want to experience the seemingly overnight success of Midjourney? Hundreds of millions in revenue in under 3 years? Sign me up.

Swimming in AI pitch decks

At Hustle Fund, we're getting hundreds of AI pitch decks a month. Even startups that aren't AI focused are bringing AI into their decks, trying to snag a piece of that VC pie.

It's like back in 2022 when just about every startup added a slide about their crypto strategy.

But unlike the Web3 craze, AI companies can deliver tangible value. And consumers are on board. People are actively hunting for AI solutions.

Like our team at Hustle Fund. We regularly seek out AI products that can help us with time-consuming tasks like inputting data or marketing processes.

But with so many AI pitch decks out there, how can investors parse out which ones are worth backing?

For starters, it helps to eliminate the ones that are clearly not a fit. For us, that means passing on startups who are are obsessed with raising huge rounds but who lack the experience and background to successfully fundraise.

Instead, we're looking for AI companies that fall into one of two buckets:

1. Startups that can raise capital fast

2. Bootstrappers who are laser-focused on solving customer problems and generating revenue

So, how do we find these gems? Simple. We ask them questions.

• What's your fundraising target, and why that number?

• What's your projected burn rate?

• How will you allocate the funds?

• What's Plan B if you can't raise the full amount?

We're also looking for startups that can quantify the dollars they're saving for customers. That's the fast track to product-market fit and building a lasting business.

Thinking beyond the hype

The AI hype train is moving at full speed right now. But the smart money is looking beyond the flashy headlines.

The real opportunities lie with startups that are heads-down, solving real problems, and generating actual revenue.

So if you're an investor: look beyond the AI buzzwords. Seek out the founders who are obsessed with solving their customers' problems, and who are more focused on earning revenue than raising it.

And to founders: focus on building a killer product and solving real customer problems. The funding will follow.

Scrolling TechCrunch,

Kera

Dissecting pro-rata rights

A lot of investors out there – VCs in particular – are quick to execute their pro-rata rights when a portfolio companies raises subsequent rounds.

But this may not be the best move.

Let's discuss →