Venture Capital Firms Evaluate AI Risks in Investment Portfolio
Global investors at the world’s largest venture capital firms, including Accel and Sequoia Capital India, are evaluating their portfolio companies’ vulnerability to artificial intelligence (AI). This move comes after the recent stock slump of online tutoring startup Chegg Inc. due to competition from OpenAI chatbot ChatGPT, which further accelerated reviews of such investments.
The Impact of AI on Investments
The reviews being conducted by venture capitalists worldwide underscore how generative AI has grabbed the attention of investors, founders, and executives, who see it as both a massive opportunity and a disruptive force. While VC firms are identifying big winners, they’re also weeding out business models that risk being rendered outdated by new technology.
Accel and Sequoia Capital India’s AI Risk Assessment
Accel is deeply focused on assessing AI’s impact on its portfolio of over 400 startups in South and Southeast Asia, spending time on the ground in India and outside to meet with founders. Similarly, Sequoia Capital, which has invested in more than 400 startups in India and Southeast Asia, is taking AI risk very seriously and has assessed all its early-stage investments in the region.
More than 75% of new deals made by Sequoia India are related to AI, and the topic dominates its investment meetings. The firm believes that the AI wave will touch everyone and is preparing for it by integrating code written by both humans and AI. Startups working in the legal contracts domain and those creating marketing videos will quickly bring in AI.
Caution in AI Investments
While venture capitalists are excited about AI’s potential, they are also proceeding with caution. Beenext Pte., a Singapore-based VC firm overseeing a portfolio of over 100 startups in India, Southeast Asia, and Japan, is being cautious in AI investments, even as they receive numerous pitches related to the field. The firm is evaluating whether the AI wave will be deflationary.
Learning Sundays
Sequoia India and Southeast Asia have a 90-minute weekly internal huddle called “Learning Sundays” to familiarize their teams with the latest AI developments and the technology’s potential impact on different industries. Recent topics have ranged from autonomous agents to open-source large language models.
Investors worldwide are evaluating AI’s impact on their investments by assessing startups’ preparedness to integrate AI. The use of AI is imperative for startup business models and offerings to evolve; otherwise, AI-native companies will out-compete them. As the AI wave touches everyone, venture capitalists are proceeding with caution while also preparing their portfolio companies to integrate AI.