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| By Chris Graebe |
When I meet someone new and they find out that I love the world of private equity investing, without fail I get asked this question: “Which sector or sectors do you focus on?”
And typically, I respond with something like, “I don't really stay too close to any one sector. I like to find startups in different areas. Mainly, I look for startups that I think have the greatest potential to return my money and then some.”
But if you were sitting across the table from me right now as I type this and asked me that same question, I would have a very different answer. And it wouldn’t even be one word; honestly, it would be just two letters: AI.
It's very rare that I will only focus on one sector. But we are in a time like no other, and the AI sector is sitting at a unique moment in time right now. Let me explain ...
Throughout history, there have been sectors that have had their moment in the sun. We can all think about those that have arrived, peaked and then normalized over time. A few that come to mind are:
• The internet
• Renewable energy
• Cannabis
• Crypto
Each of these sectors — like AI — had its early days when the cost to invest was so low, it was almost comical.
Those early days are reserved for the very early adopters … the ones who maybe give their careers to it or went all in with an unreasonable amount of money in hopes that they are right.
History usually tells the tale of whether the early adaptors were wildly incorrect or geniuses. So, let's take a look at the current timing of AI.
For years we've heard of AI. We've seen the stories of robotic soldiers and dogs that started out walking wobbly and were funny to watch.
But today, when you see the latest models, it's clear the AI sector — as a whole — is out of its own “wobbly” stage.
The Race Is On
With the introduction of ChatGPT in late 2022, the AI sector took center stage … and every other sector took a back seat. And in the months that followed, the sector has been growing at an incredible rate, creating what I would say is very much an arms race for AI startups looking to make their mark in the world.
However, it’s not just startups competing for a piece of the pie. Decades-old market-dominating companies are going all in, also.
Look no further than fast food. McDonald’s (MCD), for example, is fully embracing a shift to AI-enabled fast-food dominance. The company bought Dynamic Yield to alter the drive-up menus offered to customers.
The software pushed ice cream with enticing pictures on especially warm afternoons, and removed items when stock was low. The goal was to get patrons through checkout faster, while increasing the average sale.
Executives at Wendy’s (WEN) want to hurry customers along, too. Its partnership with Google will kick up processing speed through more automation.
Specifically, restaurants are going to get conversational chatbots that will be indistinguishable from human fast-food workers.
The AI will be able to understand customer accents, different dialects and jargon such as “JBC” for Jr. Bacon Cheeseburger. All this might seem like science fiction. It’s not.
In more far-reaching applications — literally — companies like C3.ai (AI) are using AI to survey oil deposits hundreds and thousands of feet beneath the surface of our seas.
What This Means
for Early Stage Investors
As an early stage investor, your mission and focus right now should be to sift through the numerous startups using the buzz word, “AI,” and find the ones that are actually on the cusp of true disruption.
From general intelligence/modeling, copywriting and music/image generation to synthetic data, large language modeling and code generation, there is no shortage.
Websites like dealroom.co list generative AI startups by the dozens (its user interface is pretty cool, too).
It's going to be exciting to see how our world changes over the next few months and years as AI continues to augment. But one thing is clear: The revolution and its impact on society are here to stay.
Happy hunting,
Chris Graebe
P.S. Just weeks from now, the Federal Reserve will roll out a new digital platform that gives unelected officials the power to spy on your financial transactions. Worse yet, they’ll now have the power to potentially seize your money at will. That’s why Dr. Martin Weiss has called for an Emergency Summit to Protect Your Money from Imminent Government Attacks. Click here for more while there’s still time.
