Will AI Replace Angel Investing?
This post was adapted from a piece originally published in Breakwater Ventures Tide Chart.
As an early stage investor, I’m excited about artificial intelligence: applying LLMs to unique datasets for proprietary insights; tools to make unstructured data work with AI models; products to help AI tackle enterprise use cases; tailored AI products for specific industries and verticals; and many more use cases.
The starkest, and most immediate, change I’ve seen as investor? Increased productivity and startups doing more with less.
Of course, AI isn’t the only macro trend encouraging startup efficiency.
Rising interest rates have made capital more expensive.
Technology company layoffs and startup failures have made finding great talent less expensive.
Regulatory pressure has cooled massive acquisitions.
In the past two years, these trends have forced startup efficiency, often at the cost of high growth. However, in the current evolution of AI, growth and profitability are no longer mutually exclusive. Much like AWS and cloud computing, tools like ChatGPT and CoPilot, have dramatically reduced the cost to start a startup, and not at the expense of growing quickly.
Some have theorized about the “death of the unicorn” but others, like Sam Altman, have said we’ll see the first one person, billion dollar company.
With so many tools to build a hyper efficient company, raising huge amounts of venture capital may not be as necessary for so many companies. Profitability may be easier to come by.
So, what does this all mean for early stage investors?
Like the startups we invest in, it’s time to increase productivity and do more with less.
As an angel investor in early stage startups, I’m eager for this change. I write small checks. Companies can further on my capital. And. Being a thoughtful, dedicated, and consistent investor has never been more important.
Early stage companies always still need capital to start. CEOs will still look for advice and guidance. Angel investors will be there they when do.