In today’s technology-driven world, artificial intelligence (AI) stands at the forefront of innovation. But why invest in AI right now, and especially in Europe? “The time to invest in AI has never been better: AI usage has exploded and is expected to grow exponentially for the next decade. At the same time the European AI venture market is starved for capital. This is an extraordinary opportunity for investors”, says Dr. Hauke Hansen, one of the founding partners of AI.FUND, a Hamburg based VC fund specializing in AI.
Why Invest in AI?
After 70 years of tech development AI technology has reached an inflexion point: ChatGPT and other Deep Learning Models AI are now being used by billions of people – knowingly or not.1 The growth of AI (e. g. OpenAI) has outpaced other tech innovators such as Facebook, Instagram or Tiktok and is expected to continue to grow at 40% per year each year until 2030 outgrowing other megatrends such as clean energy or healthtech.2
AI technology has now proven itself in business and is driving enterprise value creation big time: According to BCG’s recent research, companies that can scale AI see significant returns even with small initial investments.3 Applied right, it can increase revenues by 20% or lead to earnings (EBIT) gaps of 30% between AI-leading companies and companies that fail to adopt the new technology. In the years 2017-21 AI has delivered shareholder returns of 40% on an annualized basis – an attactive return for AI-investors.
Why Now?
Recent advancements in generative AI have opened up the market for AI applications. Looking at the Gartner Hype Cycle, AI is rapidly moving through the cycle, approaching the point of maximum productivity. The development and acceptance of AI follow an exponential curve, and we are currently at a pivotal point. Moreover, the valuations of AI companies are particularly attractive now, compared to the highs of 2020/2021.
Europe as an AI Investment Destination
With >6000 AI startups and being #2 globally in AI-publications Europe has established itself as a hub for AI talent. The region not only boasts a wealth of professionals but also offers attractive valuations and investment opportunities compared to other global markets: AI in Europe is underinvested by a factor of 10-20 as compared to the US, Israel or China and EU AI startups are valued at a discount of 30-70%.4
Challenges in AI Investments
Investing in AI is not without challenges: It requires deep technical understanding, and it can be challenging to identify the best AI startups, especially considering the long development cycles some of these companies may have. While direct investments have their appeal, they require a lot of time and expertise to get right. A professional fund approach is likely to avoid some of these pitfalls and give investors access to a broader deal flow, an established ecosystem and relevant tech and market expertise. A structured and professional approach allows investors to diversify risks, pursue a tested and active value creation strategy and – ideally – achieve higher returns.
Conclusion
The AI revolution is underway. While the US and Asia dominate the media Europe is well set up to leverage AI opportunities and offers attractive opportunities for AI-investors. The time to invest in AI is now for investors that want to ride the AI wave from the current investment trough to unprecedented heights.
If you want to learn more and are interested in participating in this unique opportunity, please contact us at AI.FUND. We are happy to share our vision and offer unique engagement opportunities for investors that join our fund before the end of this year. Get in touch with us at info@ai-fund.vc.
1 “The perceptron – A perceiving and recognizing automaton” Rosenblatt, 1957.
2 Kiela et al. (2021) – Dynabench, OurWorldinData. BCG value creation database
3 https://www.bcg.com/publications/2023/scaling-ai-pays-off
4 Crunchbase (2023), Stanford Artificial Intelligence Index Report (2021), Pitchbook (2021), Zhang et al. (2021)
