These two concepts are crucial to building a successful business.
These two concepts are crucial to building a successful business. Creating value is all about finding a solution to a problem, and it's often the easier and more enjoyable part of entrepreneurship. Every entrepreneur loves to dream about big solutions to big problems, but the nitty-gritty details come afterwards.
Capturing value is about obtaining a portion of the value you have created for your customers. Without the ability to capture value, there are no profits, and therefore, no business. In my opinion, capturing value is the more challenging aspect of entrepreneurship.
I wanted to introduce these concepts to provide a foundation for the content of this newsletter. Let me know if the information I have shared creates value for you.
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For the everyday venture capitalist, there is a big struggle today understading what AI startup will be the new unicorn. The market is changing at great speeds and we are yet not sure of what the future is going to look like, but we know that AI is going to have a role in it.
It becomes necessary to set a criteria to differenciate the GEN AI startups that will succeed and those that will not. I decided to create a framework for this decision making: it’s no different of how we make decisions in any investment, but it might help.
AI Startups are exactly the same as any other startup, those who solve a big pain in a great manner will succed.
It's possible that this initial framework is too straightforward, but sometimes, simplicity is key. The point is not to get caught up in flashy tech terms like AI, ML, etc. What matters most is that a product solves a problem for its customers. You can add blockchain to almost any service, but if it doesn't offer any value, the customer won't care. The same goes for AI. Successful GEN AI startups will target particular problems that specific companies or population segments have and will solve them in a better way than any other companies.
First startups to find great problems and to go to market will be most likely to succeed while startups that provide nice to have services won’t.
In my opinion, good technology is a necessary component, and it can help a startup differentiate its product from others. However, without a strong value proposition, even the best technology is useless.
In addition to having a strong value proposition and good technology, having a talented and dedicated team is critical to the success of an AI startup. A strong team with diverse skills and expertise can help to execute on the company's vision, overcome obstacles, and drive innovation.
Having a unique competitive advantage is also crucial. This could be in the form of proprietary technology, a new business model, a distinct brand, or some other factor that sets the company apart from its competitors. A clear competitive advantage can help the startup to gain a foothold in the market, attract investment, and ultimately, achieve success.
Finally, having a well thought-out go to market strategy is essential. This involves understanding the target market, identifying the most effective channels for reaching customers, and developing a plan for launching and scaling the product. Without a solid go to market strategy, a startup may struggle to generate traction and achieve growth.
USA doubles China’s AI market size and will grow almost as fast during 2022-2028
Continuing with the framework, I would then assess if the company I'm investing in is in one of the more attractive markets and industries. For example, if the US market is 15 billion and growing fast, it may not make sense to invest in the New Zealand market, which is smaller and not growing as quickly. (Again, pure logic.)
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Without having solved your problems - I don't know which startup will win the AI race - I have created this framework to have a structured approach to analyzing potential investments in AI startups.
**FOR ENTREPRENEURS - HOW TO BOOST YOUR BUSINESS WITH AI? **💡
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And there’s so many more!! I just couldn’t list them all here! If you want a full list of Gen AI startups let me know in the comments!
