Why 99% of AI startups will fail

Why 99% of AI Startups Will Fail

The next 24 months are going to see a significant churn in the AI startup ecosystem. Despite the enormous amounts of checks, money, time, and energy invested into these companies, the overwhelming majority are destined to fail. There are a few crucial reasons for this impending shakeout.

Firstly, many decision-makers backing these startups do not have a sufficient understanding of the technology. They often overestimate their grasp of AI, leading to misguided investments and decisions.

Secondly, a lot of AI technologies are becoming commoditized. The differentiation between various AI startups is minimal, and thus, the ultimate winners will not be the ones with just slightly better tech but rather those with superior operators—essentially the people driving the development and application of these AI systems.

This situation can be likened to investing in sports cards or art. Yes, some investments, like a Michael Jordan rookie card or a Jackson Pollock painting, can be immensely valuable. However, for every lucrative investment, there are thousands that do not pan out. Just as 99% of athletes don't end up with highly valuable rookie cards, 99% of AI startups will not succeed.

Keywords

• AI startups
• AI technology
• Commoditization
• Decision-makers
• Investment
• Operators
• Technology understanding
• Sports cards
• Art investments

FAQ

Q: Why will most AI startups fail? A: Many AI startups will fail due to decision-makers not fully understanding the technology and because a lot of the technology itself is commoditized. Success will depend more on the quality of the operators than the technology alone.

Q: What does it mean when AI technology is commoditized? A: Commoditization in AI means that the technology is becoming widely available and similar across different startups, making it difficult for any one company to stand out based on technology alone.

Q: How does the scenario with AI startups compare to investing in sports cards or art? A: Just as only a few sports cards or pieces of art become highly valuable, only a few AI startups will become successful. Most investors end up picking items or companies that do not yield significant returns.

Q: What should investors look for in AI startups? A: Investors should focus on the quality and capability of the operators driving the startups, rather than solely the technology they are developing.

Q: Can a deep understanding of AI technology guarantee success in investing in AI startups? A: While a deep understanding of the technology is crucial, success also heavily depends on the quality of implementation and the broader market dynamics.