Investing in (AI)merican Dynamism
by: Matthew J. Sánchez, 2023 Venture Fellow @ Alumni Ventures (Westwood Ventures), Venture Fellow @ BLCK VC (Cohort V); Prev: Republic Venture Associate; GenZScout Fellow
🚀 TL;DR — investing in visionary AI/ML founders and companies defining the future through new paradigms and supporting domestic and international interest. A riff on a16z’s American Dynamism thesis, my interest centers on AI companies, teams, and business models that will positively reshape behaviors and supercharge how we live. These founders and companies are paradigm pioneers and transcend industries, including but not limited to: SpaceTech, AR/VR, manufacturing, SaaS, education, deep tech, logistics & supply chain, design, blockchain, insurance, fintech, and synthetic data. By leveraging AI/ML, their concepts tackle vital problems that ultimately elevate, augment, or become new ways we: learn, eat, work, travel, improve wellbeing, supply and consume, earn, communicate, design and create, socialize, invest, detect and eliminate disease, own, and more…
👋 Introduction
Southern California native, Afro-Mexican American, and Venture Capitalist, I’m Matthew J. Sánchez 🌞 I’m first-generation, I earned my B.S. in Applied Mathematics from UCLA with two minors in Entrepreneurship and Global Studies. I also conducted AI/ML research at the University of Michigan in Natural Language Processing (NLP) and Semantic Analysis. On top of my VC experience, I have a healthy breadth and depth of startup and corporate experiences. My history spans business analysis, product, operations and strategy, and design, at Capital One in San Francisco and at broadn, a generative AI knowledge startup based in London.
🌐 Verticals & Landscape
👀 Current Trends in (AI)merican Dynamism
Generative AI (Gen AI)
Gen AI enables computers to create new content by using existing content such as text, audio and video files, images, and even code, as its input. Gen AI is attractive right now because up until recently machines were mainly used for analysis, logic, and more cognitive roles — now, they are becoming more masterful at “creating beautiful and sensical things” (A Creative New World, Sequoia). The floodgates of machine creation have opened. With better models and better data, generative AI can optimize many industries, create trillions in economic value, and supplement great human creation. I discuss more about Generative AI for VCs and Founders in my newsletter.
Capabilities:
Common use cases and verticals we’re experiencing right now include: Search, Gaming, Media & Entertainment, Synthesis and Documentation, Speech, Synthetic Data, Coding, Music, Design, and Customer/Human Support.
“Moats” and Competitive Advantages:
Though few are known right now and we have yet to see how strong each moat is for differentiation, some include: attractive branding/marketing, improved UX, excellent data fly-wheels, custom prompts, custom datasets, “better” custom models. True moats will be the humans behind all concepts as well as proprietary and inclusive data.
Risks & Hesitancies:
- Automation anxiety — fears of Gen AI replacing certain careers and occupations causing anti-AI sentiment among artists.
- Consent & Ethics — concerns that Gen AI makes it easier for more realistic deepfakes, can spread misinformation, and imitates artists’ likeness and styles without consent or proper credit.
- Compensation & Ownership — legal disputes and regulation of who owns the content training these algorithms; callout that Gen AI systems don’t compensate the individuals who create the inputs.
- Biases and Safety — questions and instances of AI exploiting specific communities, perpetuating biases, and places some at risk of harm. There’s also a lack of diverse, inclusive, and equitable data being used to train these models.
- Accuracy and trust — as of writing, AI chatbots are not fully reliable and have been known to spew falsehoods and flat out inaccurate outputs; therefore challenging people’s faith in its responses.
🎉 Fantasy Portfolio
Let’s say I had an enormous amount of capital today to fund my (AI)merican Dynamism pursuits. Here’s what I would deploy it into:
- Einride
Sector: Transportation/Logistics & Shipping
Geography: Stockholm, Sweden
Founders: Robert Falck, Linnéa Kornehed Falck, Filip Lilja
Blurb: Electric autonomous trucks making the transport of goods more sustainable.
Stage & Funding: Late Stage — Series B ($110mm) led by EQT Ventures, 2021
Why I like them? Einride is combining self-driving ML technology with EV capabilities for use in a lucrative, in-demand (and growing) field of freight transportation. This will make semi-truck driving even more profitable and sustainable.
Update (December 7, 2022): Einride raised a $500mm Series C led by Barclays Europe; $300mm in debt financing + $200mm in equity contribution - broadn
Sector: Knowledge & Search
Geography: London, UK & New York, USA
Founders: Calin Drimbau, Victor Paraschiv
Blurb: Generative AI knowledge assistance platform consolidating world class expert ideas, tools, and insights scattered all across the internet, into optimal, digestible content experiences so you can avoid the noise and endless searches.
Stage & Funding: Pre-Seed — raising $2mm in 2023
Why I like them? broadn is creating an innovative platform for navigating and finding knowledge across text, audio, and video seamlessly. Marrying advancements in NLP LLMs and speech-to-text technologies, broadn designs a new UI for learning from optimized information retrieval. I believe broadn has potential to scale beyond individuals and can be consumed at the institutional/enterprise level. - Ghost AI
Sector: Logistics & Supply Chain (Retail B2B SaaS)
Geography: Los Angeles, USA
Founders: Josh Kaplan and Dee Murthy
Blurb: AI-powered SaaS eliminating the $500bn worth of excess inventory produced and wasted annually by retailers and brands by optimizing the inventory lifecycle.
Stage & Funding: Early Stage — Series A ($13mm closed July 2022 led by Union Square Ventures)
Why I like them? Ghost is B2B SaaS providing both an economic and sustainable benefit for buyers and sellers alike in the form of a marketplace platform. On top of an impressive founding team, Ghost combines real-time data with intelligent AI solutions to help brands monetize their unsold products sustainably and discreetly. With dynamic pricing and forecasting, the platform is tackling the $500bn-$1tn in excess inventory worldwide. - Runway
Sector: Media & Entertainment (Video)
Geography: New York, USA
Founders: Cristóbal Valenzuela, Anastasis Germanidis, Alejandro Matamala-Ortiz
Blurb: All-in-one AI suite for video and content editing and creation.
Stage & Funding: Growth Stage — Series C ($50mm closed December 5, 2022 led by Felicis with add-ons by existing investors such as Compound, Lux Capital, and Amplify Partners)
Why I like them? Aside from Runway’s $500mm valuation as of writing, the 2018 founded startup has relentless optimism and is quite literally creating the future. Cristóbal Valenzuela’s vision as CEO is “Picture you’re watching a movie and you are the lead actor in the movie: your voice, your body, your face.” Staying true to Runway’s motto: Unleashing a new wave of creativity and storytelling, they’re even hosting the 1st Annual (and first-ever) AI Film Festival in NYC in February 2023. - AstroForge
Sector: SpaceTech (Celestial Mining)
Geography: Huntington Beach, CA
Founders: Matt Gialich, Jose Acain
Blurb: Mining asteroids to extract precious metals, like Platinum and Cobalt, needed to power our everyday lives while providing a climate and cost benefit.
Stage & Funding: Early Stage — Seed ($13mm) led by Initialized Capital, 2022, with participation by Seven Seven Six and Soma
Why I like them? Astroforge is on a mission to unlock the near-limitless resources in space. We rely on valuable metals and minerals on Earth which unfortunately have a defined limit. The charismatic, well-qualified Astroforge team is bringing celestial and spatial resources down to Earth at a fraction of the cost and with lower climate impacts than traditional terrestrial mining. In 2023, Astroforge is embarking on two important missions: a refinery demonstration pressure testing their tech in space and a deep space expedition observing one of their 1.1 million target asteroids.
💰 Funding
(AI)merican Dynamism is an industry agnostic smörgåsbord focusing on all things AI/ML. In 2022, +$2.1bn was invested in U.S. based generative AI startups alone. This excludes AI/ML as an umbrella category and all geographies.
Worldwide AI/ML investments have grown exponentially the last decade. In 2012 the market witnessed $6.6bn in funding. And according to Preqin (May 2022), 2021 saw $81bn in AI/ML investment, making up 1/5th (20%) of all VC deals made. Until now, this meant a record year for the AI/ML industry.
2023 and beyond is set up to be a hot year for AI funding. The global AI market size is projected to reach $1394.30bn in 2029. That equates to a CAGR (compound annual growth rate) of 20.1% between now and 2029.
Precedence Research estimated the size of the AI market to be around $119 billion in 2022 and is predicted to grow to over $1.5 trillion by 2030.
📢 Future Trends in (AI)merican Dynamism
Multisensory (“Multimodal”) AI
Multisensory learning is a theory that we learn better when taught using multiple senses. Applying this concept to AI imagines even more sophisticated and nuanced outputs. For instance, incorporating haptic (kinesthetic/touch) data with existing generative AI (text/image/video/etc.) could be a game changer. Creating new ways for machines to interact and understand our physical world and provide richer, more unique, hyper-personalized content and results.
Two Ideas:
- In Medicine, multimodal AI could craft highly personalized, holistic recommendations and diagnoses by cross-pollinating haptic data from biosensors, patient scans and imaging.
- In Luxury and Beauty, multisensory AI could generate uniquely curated fragrances, attire, marketing, or even skincare by coupling various data inputs like visual, olfactory, textual, and tactile, collected by comprehensive datasets. Seasonal drops, “personal lines,” sustainable research, and fast-fashion can be the first to benefit.
Coaching Networks
The concept of incorporating edits to generative AI LLMs, prompts, or the outputs, in order to improve the model and achieve specific results (or jobs to be done). In other words, the AI models get advanced enough where, based on the desired outcome in a given context, it knows which suggestions and actions to execute exactly (e.g. closing a deal, landing a client, negotiating a contract). This particular layer of the Gen AI stack will be proprietary and therefore in theory will grow smarter and fortify with every use by its network of users.
Two Ideas:
- Personal & Executive Assistance — generative AI business models that are able to carry out tasks and requests almost flawlessly; even optimizing what action(s) to make in order to reap the best result.
- Spatial Data (SpaceTech) — as space exploration and expansion grows, coaching networks can optimize use cases like asteroid mining, cosmic mapping, mission planning, and even satellite development. Opportunities in the market of Aerospace & Defense are abundant.
AI Guilds
Similar to Coaching Networks, “AI Guilds” will be consortiums of users or institutions which develop best-practices and styles of generative AI for their particular communities. These guilds will act on continuous improvement, basically forming healthy data flywheels, and curate AI models that are “signature” for their company, brand, institution, etc.
Two Ideas:
- Richer Synthetic Data: The synthetic data sector of AI is already a $387bn industry. AI Guilds will continue to add value to the market by contributing more versatile data which targets specific goals for companies. From here they’ll be able to build and train stronger, niche models producing richer synthetic data they can then license or sell to others.
- Prompt Engineering Styles: Like writing styles or coding languages, there will be entities that establish, educate, and expect certain prompt frameworks and styling for particular groups. For instance, signature prompt engineering by top-tier consultants from McKinsey or niche prompt formatting for world-renowned Gen AI artists.
🔑 Key Takeaways
- (AI)merican Dynamism is my investment thesis interest and specialty. I focus on founders and ideas that will ultimately (re-)define and supercharge how we live and function.
- Because (AI)merican Dynamism is industry agnostic, it is a smörgåsbord of relevant sectors. Common verticals: SpaceTech, Deep Tech, XR (AR/VR), HealthTech, SaaS, Hardware, Logistics, Manufacturing, Food & Energy Systems, Web3, among others.
- Hot topic within (AI)merican Dynamism is Generative AI. Gen AI capabilities include: Search, Gaming, Media & Entertainment, Synthesis and Documentation, Speech, Synthetic Data, and Coding.
- Funding for AI/ML startups in 2021 surpassed $81bn. In 2022, over $2.1bn has been invested in Generative AI alone. 2023 is promising to be a hot year for Gen AI. The global AI market’s projected to be $1394bn in 2029.
- Trends I foresee within (AI)merican Dynamism include: Multisensory (“Multimodal”) AI, Coaching Networks, Enhanced Spatial Data & SpaceTech, and AI Guilds. I list potential ideas for each category.
I’m Matthew J. Sánchez 🌞 If you’re building in the realm of (AI)merican Dynamism and are Pre-Seed through Series A, I’d love to hear from you on Twitter (@matthewjsanchez) or LinkedIn.
