How To Analyze AI Startups

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Artificial intelligence-based startups continue to grow and increase.

Investors funding AI companies should look for the following:

Market size.

New markets can be difficult to measure.

For brand new categories, calculate the number of users in the market and how much they will spend on an AI solution.

For existing categories, calculate the current number of users in the market and how much they will pay additionally for the AI component.

Value add.

How much value does AI add to the product?

Does it increase the revenue substantially or only marginally?

Does it give access to new users and applications or only increase functionality to existing users?

Moat.

How much of a competitive advantage does AI bring against the competition?

If it's only a small modification to an existing LLM, then it can be easily copied.

If it has been trained on a unique data set then it will have a greater advantage over competitors.

Distribution.

How well does the startup run a go-to-market strategy?

A fast penetration of the market will be a great advantage over those who take time.

Consider these factors in analyzing an AI startup.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_______________________________________________________

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The Importance of Unit Economics

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

The unit economics of a startup determine its success.

The stronger the unit economic case, the higher the margins, the faster the company grows.

In analyzing a startup, measure the unit economics regarding customer acquisition cost and lifetime value.

Calculate it at the unit level to understand the health of the business.

Many venture-funded startups appear to be growing well, but this is often from infusions of capital from investors rather than growth from the customers.

The unit economics show how the startup is doing regardless of the funding.

It also works with early-stage startups where the top-line revenue is low.

By looking at the systems behind the startup, such as sales, service, and support, one can see if the basic systems are working.

The margin on each sale, the cost to acquire a customer, and the lifetime value give an accurate accounting of the business.

If these numbers look good, then the startup may be a candidate for investment.

Consider the use of unit economics in your startup diligence.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_______________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

For Feedback please contact info@tencapital.group

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What Is a Fund of Funds

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Unlike most venture capital funds that invest in startups, a fund of funds invests in other funds that invest in startups.

Instead of investing in multiple funds, an investor can gain diversification by investing in a fund of funds.

As with all good VC funds, there's limited availability for investors to join.

The standard return on a fund of funds investment is 10X.

There's competition among the limited partners to get in.

There are challenges with a fund of funds.

To reach diversification, most funds will need substantial resources to fund it.

The management fees can be expensive.

Some funds have mediocre managers and the resulting returns to show it.

As with all venture funds, the money is locked up for six to ten years.

Also, the power law still applies.

Only a small number of the investments in the fund will pay out to cover the overall expense.

Consider a VC fund of funds for your portfolio.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_______________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

For Feedback please contact info@tencapital.group

Please follow, share, and leave a review.

Music courtesy of Bensound.