AI Investment Surge: Unveiling the Top Corporations Behind $10B+ Deals in Q1 2023

0:00Today on the podcast, we want to talk about what is happening in venture capital and AI startups. We know that as of the last couple of years, venture capital investments have seriously slowed down with many firms that I've looked into completely shutting down, not raising more funds, laying off large groups of their staff, and really hunkering down for this sort of VC investing winter. When crypto crashed, that did not help the situation, but a lot of people are talking about the fact that the AI boom right now is kind of turning things around on that. So today on the podcast, we're going to talk about what is happening for venture capital, corporate venture capital, and what is happening in AI.

0:41So I think the first thing to know is that right now, really, AI in general is just kind of all the rage, and corporate venture capital are actually starting to mobilize and start investing. So I would say a small but growing number of companies right now are rolling out a number of efforts in a bunch of different ways that are focused on investing in the current AI boom. Kind of the big picture of all of this is that generative AI and large language models are getting a lot of attention for their just, you know, their potential to automate everything within businesses. And so big corporations and businesses are investing in them, A, for their own companies and their own company's productivity, right?

1:21They don't want to be left behind, but also because they know they can capitalize on that and sell it to perhaps their competitors or other people. I would say there was something that I found pretty interesting. There's a recent quote from Paul Drews, who's a managing partner at Salesforce Ventures. And so that's like the venture capital arm of Salesforce, the SaaS company. And he said, from an enterprise perspective, more than two thirds of leaders are trying to prioritize generative AI. In addition to that, we get a really interesting statistic recently out of Workday Ventures that says of the 44 startups that they have backed, about 25 % of them are already using technology, essentially like APIs to open AI to help increase and improve their productivity within their company or their products.

2:08So a lot of the companies that we're seeing now have already implemented it because it's so easy to integrate like an API from OpenAI directly into these products. People are iterating and integrating them really fast. So I think following the typical playbook, corporate VCs right now are especially emphasizing their ability to make the technology ecosystem of their parent companies available to the upstarts that they back. So some of these companies and their funds that they're doing, so some of these big SaaS companies that have created AI-specific funds and how much they're allocating are, number one, Salesforce.

2:45So back in March, Salesforce said that they were going to create a new$250 million fund dedicated to generative AI, investing in companies. And there's kind of, like I said before, there's two reasons for this. Number one, sure, they could help create a company and make a profit. but we've seen this from a number of different companies. I believe Ford, you know, originally invested, I think like 500 million into Rivian, who obviously would just be an electric truck company, so a competitor to them. And I think that back in, I think in February, when everything was said and done, they sold their share.

3:17And of the 1.2 billion they ultimately invested because they did some follow-on rounds, they made about$3 billion. So they, you know, essentially doubled their money. And I think that, you know, that is one side to this. But right now with AI, I think a bigger area is actually strategic partnerships. So, you know, companies like Salesforce and setting aside$250 million for generative AI companies, I think they're hoping that they can integrate those companies into their own into Salesforce to make it a better product and to keep it ahead of its competitors. Another one is Workday. In February, it said it was going to do a$250 million addition to a fund that it currently has specifically for AI and machine learning startups.

3:56um open ai famously raised 175 million dollars to invest in ai startups before chat gpt even launched they kind of had this incubator and they were investing in a handful of generative ai companies that are successful today amazon also recently announced that they are creating an accelerator program for generative ai startups and that also includes amazon web service credit so aws is the hosting. And I think their goal there is really they want to bring people to run their companies on AWS and make sure that they're competitive because Google is pushing really hard to be kind of a platform. I think they have a deal with Anthropic, where Anthropic is running all of its AI.

4:38And obviously, Microsoft has a deal with Azure getting OpenAI on there so that it's going on its own own hosting, and they make a lot of money from that. And lastly, Solana, which traditionally is a blockchain company. It's, you know, the foundation behind the blockchain technology, Solana, and they are famously backed by a lot of venture capitalists. There's a lot of controversy back in the crypto boom and crash where a lot of VCs allegedly pumped up Solana, invested in it, got a lot of people working on projects there. And then when they could, they all sold their shares, it kind of crashed.

5:14It's kind of interesting because investing in crypto from a venture capital perspective may be slightly different than investing in, you know, startups where it's like expected that you're going to be with that startup for a number of years. Whereas sometimes with these crypto ones, if they got pre-sale allocations of the actual token, they could dump them within, you know, six months of a project launching and essentially crash the price of the project, kind of kill the project. In any case, Solana announced that they will be having an accelerator program and they have a$10 million fund that they're going to be giving out grants to developers working on generative AI applications, presumably on the Solana blockchain.

5:51So helping bolster their own blockchain. While at the same time, you know, obviously, they'll be owning. Perhaps I'm not sure if they're actually gonna be owning parts of the company, because I think it's just gonna be grants. So yeah, they're just helping to promote projects on their blockchain, which, you know, will help them because people have to buy their tokens to do transactions on their blockchain, yada, yada, and will help support them. So I think this is fundamentally a really big shift in technology. You know, a lot of people are comparing what's going on right now in AI to what happened when mobile like cell phones came about with the advent of the iPhone, or even just cloud computing and how all of a sudden we have all of these platforms where everything is stored in the cloud.

6:32I think if we're really looking between the lines on this. Drew from Salesforce, again, was talking and he said, it's helpful to signal where we're spending our time on a day to day basis. And I think, you know, that's despite the fact that Salesforce Ventures has been investing in artificial technology, like for, for many, many years. But I think right now, they're really accelerating the rate that they're doing this. And I think we're going to start seeing more companies make the same step where corporate, it's called corporate venture capital. It's essentially like a company has their own investment arm with them where they are promoting products or developing products, funding products that can help them.

7:16I think this is a cool concept, corporate venture capital, just because a lot of times when a company gets big, they're focusing on whatever their core products are, how to improve them, how to create a moat, how to fight off incumbents, and they're not always looking at the most innovative next thing and iterating as fast as a startup could. And so I think, you know, creating these venture capital funds within corporations allows them to do that, acquire companies, fund them from an early stage and kind of still get the same benefits that startups have with new with new products without having to, you know, I mean, it's just hard with these big kind of clunky organizations as they get older, they are a lot less nimble.

7:56So I would say, when we're looking at overall, what's happening in the market pitch book recently, which is kind of a company that aggregates data about investments and what's going on in the industry. They recently said that generative AI companies over the last this quarter have raised$1.6 billion. And so I think that we are seeing a lot of money pouring into the sector. Actually, I think it was$1.7 billion was generated across about 46 deals in Q1 this year. But what is also interesting is that about$10.6 billion worth of deals were announced in this quarter, but they haven't yet been completed.

8:36So you can't always count them 100 % because there's due diligence and maybe some things will go south on different deals. But I think it gives us an idea, right? $1.7 billion done, over$10 billion announced. This is growing exponentially. And I think it's going to be a very competitive market, a very competitive area. I think a lot of more, a lot more corporate clients will start getting into this. And the final thing I want to talk about is just the fact that traditional VCs who have been very, I don't know, have kind of held on to their purses and been less, less willing to dole out money to startups over the last, you know, year or so with everything crashing.

9:14One of the biggest venture capital firms in America is Bessemer Venture Partners. And they recently just committed$1 billion dollars to invest in AI startups. So I really see this as the new the next step in in a in venture funding. This is the new area. This is the new hot area that everyone is going to be putting money into. And I think with that comes some pros and cons, the markets can get frothy bubbles can happen, perhaps a project that was good got overfunded, and it has issues from that. But I think more optimistically speaking, I think that a lot of money in a specific area accelerates the growth dramatically.

9:53And I think if you're seeing something like 80 % of startups that are pitching, like I saw a VC fund say about 80 % of the startups pitching them right now are AI companies. That's just where everyone knows they can get money. So everyone ships their company to being an AI startup, or everyone is starting an AI startup. And so I think some cool things do come out of that where a lot of innovation happens very rapidly. This is where the money is. And so people are developing all in the same area. And I think we're going to see the acceleration of AI and all of the use cases accelerate dramatically because of that and just because of all the money so this is going to be a very interesting area to continue to watch