Having passion and the vision to pursue it doesn’t ensure VCs being onboard withyour perspective right from the beginning. Investors want outcomes, good ROI. To charm VCs and push your startup to the next level, you need to go beyond buzzwords and give them something they can’t resist to fund.
AI startups have made major headlines for investments firms, but not all of the news has been good. An MGI published research study estimates that currently demonstrated technologies have the potential to automate roughly half of the work activities performed in ASEAN’s four biggest economies: Indonesia (52 percent of all activities), Malaysia (51 percent), the Philippines (48 percent) and Thailand (55 percent). These tasks currently generate more than USD 900 billion in wages.
Investors won’t throw away their money on half-truths and you need to prove that you have a legitimate future in the AI space. VC funding for AI hit record high by US$ 9.3 billion in 2018, with more on the way as per a Forbes Study . The money is available, is your startup eligible?
Here’s a checklist to ensure your AI startup has most of what’s needed to secure VC investment:
1. Capable and Multidisciplinary Teammates
You can’t do everything alone. Who else at your startup will help accomplish your vision? A technical founder may need help with customer service and marketing, while a great salesperson may need technical support. Venture Capital firm, Village Capital took it to the next level by adopting a unique model to identify the ventures it will invest in. Rather than going through top-down due diligence, Village Capital runs investment readiness programme for 10-12 entrepreneurs within a specific sector at a time, use team analysis process to decide the ventures it will invest seed capital in.
Some VC firms will judge your team by feel. Even without formalized frameworks, they all need to know whether your team is up to the challenge. Recruit people you trust, then delegate early and often. If your startup doesn’t need you to jump in and fix each and every little issue, investors will feel more comfortable signing checks.
2. Opportunities to Expand
Can your company pivot to take advantage of new opportunities? Investors adore flexibility, particularly in early-stage startups proving themselves in the market. You may discover that your services or products works better as a B2B offering as compare to direct pitch to consumers.
Cocoon Health, maker of an AI-powered baby monitor that tracks a baby’s sleep data and breathing rate, has recently begun licensing its technology to businesses interested in its tracker-free vital sign detection. Regardless of whether you find success in your first market, greater opportunities may exist in others. Focus on delivering value while developing technology or services that could be utilized by other markets to keep investors intrigued.
3. Sustainable Data Strategies
AI startup must be fed a steady diet of actionable, reliable and secure data; it is how they learn and function. The most fundamental cultural and organizational shift required for implementing AI in corporations is to embrace data-driven decision making. Decisions once made on instinct can now be made on the basis of evidence—and perhaps even automated. But multiple industries in ASEAN are struggling with getting their data foundations in order. Many of them lack the adequate backbone sensor systems required to track operational data.
A McKenzie Global Institute survey found that AI is still a relatively new concept in the ASEAN, companies will need to adjust to this new paradigm. Even companies that have invested in data and analytics may fail to use data effectively in decision making. Some of the pitfalls according to the study include the following:
- Poor articulation of the business case and sources of value, leading to weak management support.
- Lack of capability building among mid-level managers and a reluctance to rely on insights derived with AI as the basis for making decisions.
- Limited investment in workforce retraining, especially among frontline workers.
- Lack of workforce buy-in due to fear of job loss
Artificial intelligence models are just as brilliant as the data they consume. Startups in the AI field need access to proprietary data and a product fit for accomplishing something with that data that no one else can do.
Ablacon, for instance, made a product that can understand and treat a condition called atrial fibrillation, also known as arrhythmia. By feeding the tool a feast of heart-related data, Ablacon made something that can identify and treat a common condition with negligible outside assistance.
Healthcare desperately needs more tools to gather bits of knowledge from the complex information machine that is the human body. However different fields have open doors too. Real estate, manufacturing, education, supply chain— everything depends on data. Startups that gain access to more and quality data and use it appropriately get preferential treatment from potential investors.
4. Proof of Traction
Investors stopped placing monthly user counts on a pedestal years ago. Nowadays investors want to see practical studies, conversions and results that showcase the use of a product in the field. For AI teams, that means landing a client and successfully demonstrating the AI’s value proposition through the client’s success.
Running lean isn’t easy, but investors remain leery about funneling money into companies that lack real accomplishments. ZappyHire, founded in July 2018, managed to bootstrap its way into the burgeoning HR technology sector with an AI product connecting companies to the right candidates. According to its founders, ZappyHire became cash-positive within its first year- a great sign for potential investors.
Take the classic founder’s advice to stop focusing on the needs of the world. Rather concentrate on the need of few clients in front of you, create the solutions to coordinate their needs and leverage that success into funding a more brighter and promising future.
You may not have all your ducks in a row for your AI startup, but don’t let that prevent you from meeting investors. Discuss about how you plan to acquire capable teammates and how would you get it. Show the potential of your product and speak with mentors about opportunities to explore other industries.
Securing investment may take some time. But if you do it right, you’ll end up with all the cash you need to realize your AI vision.
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