Artificial intelligence (AI) has become a hot topic in the startup world, but not all companies are truly innovative. Amber Nigam, CEO and cofounder of basys.ai, is using generative AI to streamline prior authorization for health plans. To stand out in the AI race, startups must solve unique problems and differentiate through domain expertise, proprietary data, and innovative approaches. They should focus on how AI enables their core value proposition, not just that AI is being used.
Investors evaluating AI startups should consider if the business would still be strong without AI. It’s crucial to choose problems that align with the capabilities of AI and are well-suited to the specific industry. A founder’s deep understanding of their domain is key, as it allows them to develop products that resonate with customers and navigate industry-specific challenges effectively. Technical differentiation through proprietary datasets, innovative techniques, and robust infrastructure can help startups build defensible moats.
Startups should aim to be resilient and adaptable by employing an ensemble approach, combining multiple AI models and techniques. AI can enable business models previously infeasible, such as dramatically lowering costs to offer lower-priced products that meet customer needs profitably. Founders should understand both their industry and how AI uniquely solves challenges. As the AI market evolves, startups need to be agile and comply with regulations to stay competitive.
Investors should look for founders with industry expertise, large addressable markets, unique technological and business advantages, disruptive potential, capital efficiency, early customer traction, and revenue growth. By evaluating technical differentiation, business model innovation, and industry-specific value proposition, investors can identify startups that will truly shape the future. AI is a valuable opportunity, but investors should ensure they are backing companies building real value, not just chasing the buzzword.
