Data is the new oil for anyone looking to invest in companies with potential for rapid growth and high returns.
At River Capital, we set up Fund:AI because we kept seeing early-stage tech orientated companies that had a lot of data. These businesses wanted help to build unique products off the back of that data, which had the potential to become rich assets because of their highly valuable intellectual property.
We call it an artificial intelligence fund as inevitably we are using that data to create AI solutions; you could also call it a data fund as that is where the investment of our funds and technical expertise is targeted.
We look for businesses where the founders see the value of their data and can build data solutions that can help them achieve higher sales, improve their automation workflows or delight their customers – or all three.
Businesses that do this can attract higher valuations and better returns for investors – and attract faster trade sales.
I believe our offer to businesses stands out from other venture capital funds as our small team is mainly ex-operators who have raised money, scaled and exited our own tech firms – and we’ve got the war scars to prove it!
It makes us highly empathetic with company founders and we love to be hands-on, helping them find solutions when things don’t go to plan – which is usually the case as they are doing something new and it’s impossible to have all the answers on day one.
The explosion in generative AI happened at the same time as the launch of our AI fund in 2022, which was a coincidence and helpful in some ways as it fired the public imagination. There were fears about AI taking away jobs and robots getting out of control – which you could say wasn’t helpful but at least it was part of a growing awareness of the power of data.
Artificial intelligence has been with us for decades and companies have been using it by stealth or by accident or by proxy. This might have been through using computer vision or building algorithms or it could be analytics, which is now called AI.
AI is just maths and data and processing speed and what has driven this AI explosion is the big increase in computing power. The fact that you can now spin off and process terabytes of data in a second to give you an answer – that’s what this explosion is about.
A lot of companies will have loads of data squirrelled away in their databases and management teams instinctively know it has value but don’t know what to do with it.
We are looking for those management teams who want us to help them unleash the value of their data.
For investors this is an exciting but difficult to assess class of assets; if you are a family office or wealth manager you will be aware of the significance of AI but not understand how it can transform a business. At Fund:AI you can trust our incredible team of to carry out the right diligence and identify the best early-stage companies for investment.
We like to see a path to ten-fold returns for any business we invest in; inevitably some will not achieve that goal but that is what we look for before we invest. As a portfolio approach we target quadruple returns which is in the upper quartile of returns for EIS investors.
For those of us who have been working in AI for a while this is an incredibly exciting time. Generative AI is just the tip of the iceberg; once the excitement has died down we will see what’s below the surface – and that will become the norm.
David Walters is Investment Director of Fund:AI at River Capital.