Riding The AI Wave And Investing In StartUps

AI startups have attracted billions in institutional funding which has sent valuations skyrocketing. Billions was poured into OpenAI and valuation in October had tripled to $86 billion. Although with the abrupt outsing of Sam Altman last week OpenAI’s valuation, we already have seen Worldcoin token investments drop by ten percent.

AI investments are heating up as Amazon has recently committed $4 billion to Anthropic, Nvidia investing in Cohere’s $270 million funding round, and Microsoft poured over $13B in commitments to OpenAI.

But who is making all the money in AI?

For individual investors, gaining exposure to promising private AI companies is challenging. Venture capital and private wealth groups typically reserve allocations of these private-company shares for institutional investors and ultra-high-net-worth (UHNW) individuals, so finding inroads can be difficult.

Grace Chen, founder of alternative investment platform UpMarket, is working to change that, “This year UpMarket has helped our clients invest in OpenAI, Cohere, CoreWeave, and other leading companies like Neuralink, SpaceX, and Stripe.” She added that “we are seeing a lot of demand by accredited investors who want access to pre-IPO deal flow in the Artificial Intelligence space and interest in investing in some of the 2021 startup darlings that now trade at significantly discounted valuations.”

For investors who can tolerate illiquidity and the increased risk that can come with private investments, fast-growing AI companies may be the most dynamic opportunity within technology today. Pricing is one area that may spook AI investors because high growth typically demands investors pay a high multiple on revenue or earnings. With projections that the AI market will 6x over this decade to a market of over $594 billion by 2032, expectations are lofty.

Chen explains that what makes UpMarket different from other platforms is their curation process which involves due diligence and a willingness to walk away from deals that don’t offer attractive terms or investor-friendly structures, “some platforms inundate investors with 100s of deals, often for obscure pre-revenue companies, or on terms that vary wildly from recent secondary-market transactions.” Chen added that some platforms will drastically increase the pricing and fees for the hottest offerings, adding that “at UpMarket, we try to focus on the best companies, with the best structures, at the best prices.”

While investing always comes with risks, it is promising to see investment platforms like UpMarket democratizing access to promising AI companies and a range of asset classes from high-growth private companies to hedge funds and private equity.

Sources:

Rehmat Orakza for his research contributions to this article posting.