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4 things VCs get wrong about AI
Oct 24, 2021 | Venture Beat
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VCs have a detailed playbook for investing in software-as-a-service (SaaS) companies that has served them well in recent years. Successful SaaS businesses provide predictable, recurring revenue that can be grown by acquiring more subscriptions at little additional cost, making them an attractive investment.

But the lessons that VCs have learned from their SaaS investments turn out not to be applicable to the world of artificial intelligence. AI companies follow a very different trajectory from SaaS providers, and the old rules simply aren’t valid.

Here are four things VCs get wrong about AI because of their past success investing in SaaS:

Venture capitalists continue to pour money into AI companies at an astonishing — some might say ridiculous — rate. Databricks has raised a staggering $3.5 billion in funding, including a $1 billion Series G in February, followed six months later by a $1.6 billion Series H in August at a $38 billion valuation. DataRobot recently announced a $300 million Series G financing round, bringing its valuation to $6.3 billion.

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