AI startup founding

Artificial intelligence (AI) has emerged as a transformative force in today’s rapidly evolving technological landscape. While some view AI as the ultimate game-changer, others remain skeptical and consider it as just another passing hype. One thing is sure: AI startups are attracting significant funding and capturing global attention.

But is AI truly a transformative force that can reshape the landscape and revolutionize industries, or is it simply a buzzword?

Exploring AI startups

AI startups specialize in developing, implementing, and applying artificial intelligence (AI) technologies. These startups leverage AI algorithms, machine learning, deep learning, and other AI technology to create innovative solutions across various industries.

While the most reputable AI-powered platform reached Series A, B, or C funding, most are in their early phases, seeking seed or pre-seed funding.

Categories of artificial intelligence platforms

Fundamentally, all AI platforms are related somehow to generative AI tools. However, each type of AI tool serves a different purpose and utilizes unique algorithms and techniques.

Four category of AI platforms
Four categories of AI solutions

Generative AI 

Generative AI tools generate new content or data based on patterns and examples. You type in something generative AI tools use the tex input for text generation, picture creation, or even music composition. For instance, it enables users to create an outline for their article or youtube video.

Predictive AI

A predictive AI platform uses predictive analytics to analyze data and make predictions or forecasts. These types of AI solutions can make pretty accurate predictions based on patterns and tons of historical information. It sounds pretty theoretical, right?

But imagine having accurate predictions on the customer’s behavior in the insurance or media industry. Using massive amounts of customer-specific information to detect financial risk at an insurance company’s customer will enormously impact the whole industry’s pricing strategy. 

Besides insurance or media, it can be useful in many different industries. It helps mitigate risks, detect fraud, optimize workflows, or improve marketing campaigns.

Categorization AI

Categorization AI solutions classify or categorize data into predefined groups or categories. They can automatically sort and organize data based on specific criteria. It enables businesses to collect and analyze information smoother.

A categorization AI tool can make business life easier in many ways. For example, you can use such a tool to select all the fintech companies from a list of one thousand companies. Do you want to target real estate agent companies? No problem, applying AI helps collect relevant businesses from hundreds of URLs.

Summarizing AI 

A summarizing AI tool is very similar to the typical generative AI. Summarizing AI solutions extract key information from a large amount of text or data into a summary. These AI tools are helpful for tasks like summarizing articles, reports, or lengthy documents.

AI company investing insights

According to GlobalData’s information, AI startups raised over $50 billion in venture capital funding in 2022. Despite having remarkable funding rounds and unicorn births in Q1 of 2023, the overall investment activity in the AI industry could not avoid the challenges of the broader venture landscape.

AI startup founding
Global AI funding fell to $5.4B in 2023, Source: cbinsights

The AI startup ecosystem is highly dynamic and rapidly evolving. Most AI startups are in the seed stage or even pre-seed. In these stages, investments happen through various channels. Pre-stage or seed-stage funding options include angel investors, venture capital firms, accelerators, and crowdfunding. Tracking accurately these smaller investments can be difficult. 

Related post: Angel Investor Vs Venture Capital: The Ultimate Guide For Startups

Although specific data on the distribution of AI funding across different categories is limited, recent findings from PitchBook reveal some interesting insights. In the first quarter of 2023, a total of $1.7 billion was raised by generative AI startups through 46 investment deals.

There are many promising AI startups to watch, and these companies secure funding even in an economic downturn.

It’s not a crowded market yet, but it is getting more competitive

Lu Zhang on the AI Market, the founder and managing partner of VC firm Fusion Fund

The trends show that the market anticipates high investment activity in AI-powered startups and significant growth potential. So, the AI startups might have a strong influence on startup trends in 2023.

Top 6 AI Startups to Watch


I am sure everyone heard about OpenAI. OpenAI is an AI research and deployment company that conducts research and implements machine learning. OpenAI offers a range of powerful AI tools like ChatGPT, DALL-E, and GPT-3.

It was founded in 2015 and is located in San Francisco. OpenAI has 14 investors, including Thrive Capital and SVA. In early 2023, Microsoft announced to invest $10 billion in OpenAI, and it raised $11.3B funding so far.

Shield AI

They are developing drones and aircraft that operate autonomously without GPS, communications, or a pilot. Shield AI aims to protect service members and civilians with intelligent systems. The company’s Hivemind autonomy stack is the first and only autonomous AI Pilot deployed in combat since 2018.

Shield AI was founded in 2015 and is located in San Diego. It has 13 investors, including US Innovative Technology Fund and Breyer Capital. Shield AI closed its last funding round from a Series E round on Dec 13, 2022. An impressive amount of $573.1M has been raised so far.

Eightfold AI

Eightfold AI is a developer of a talent intelligence platform used to help companies find, recruit, and retain workers. Its platform bridges the talent gap by using the power of artificial intelligence. It allows talent management to be a competitive advantage and enables clients to match candidates to the right roles.

Eightfold AI was founded in 2016 and is located in Santa Clara. Eightfold AI closed its last funding round from a Series E round on Jun 10, 2021. It has 7 investors, including Foundation Capital and Lightspeed Venture Partners. Eightfold AI raised $396.8M to date.


The Moveworks generative AI platform aims to increase employee productivity. Their mission is to automate and streamline the troubleshooting process, helping employees quickly resolve technical issues and get back to work efficiently.

It is located in Mountain View, California, and was founded in 2016. Moveworks has 10 investors, including Sapphire Ventures and Bain Capital. It closed its last funding round on Jun 30, 2021, from a Series C round and raised $305M to date.


Jasper is an AI writing tool that helps businesses create content. The company assists with creating marketing copy for items like blog entries, product descriptions, company biographies, ad content, and social media captions.

It was established in 2021 and is located in Montréal. Jasper has 11 investors, including Founders Circle Capital and Insight Partners, and closed its last funding round on Oct 18, 2022, from a Series A round. Jasper raised $131M so far.


Frame AI is a company that focuses on revolutionizing customer communication analytics. Their mission is to help businesses better understand and analyze customer interactions across various channels, such as emails, chats, and calls. Frame AI aims to provide valuable insights and actionable data using advanced AI technologies. This enables businesses to improve customer experiences, optimize processes, and make informed business decisions.

Frame AI is located in New York, and it was founded in 2016. Frame AI has 10 investors, including Greycroft and G20 Ventures. It has raised $17.9M to date, with its latest stage being Series B.

Related post: Top 21 Promising Generative AI Companies

AI Hype vs. Reality

As with all disruptive technology, AI is very divisive. Some choose to ignore its potential and pretend it doesn’t exist. While on the other hand, there are individuals with incredibly high hopes and expectations for what AI can achieve in the very near future. 

This is mainly because AI technology is evolving at such a high pace. It is challenging to understand what implications it may have. In the current stage of Ai industry, separating the hype from the reality is crucial. 

We can all agree that AI-related businesses have a high growth potential and can be game changers in many industries. Since the hype began, some of the big companies in the tech market dedicated their resources to AI development. In parallel, numerous AI startups are established worldwide every day.

Although AI already impacts people’s and businesses’ lives, we should remember where we are in the journey.

The Gartner Hype Cycle illustrates the maturity and adoption of disruptive technologies. It can help us to understand the potential risks associated with the AI industry.

Ai startups hype
Gartner Hype Cycle

Arguably, the AI hype is getting closer to the peak of the inflated expectations phase. While many companies expect AI-powered tools as the ultimate solution to all problems, it has limitations.

The truth is that AI technology still has major technical, ethical, and data privacy issues to overcome. So, it is a long way to go until it can be adapted for most businesses in an effective and safe manner.

It is clear that AI has generated undeniable hype in recent times. Everywhere you turn, there are discussions about its potential and game-changing capabilities.

But just because there is hype does not mean there is no real value behind it. While it is tempting to have a skeptical attitude and put our heads in the sand, ignoring the advancements in AI would be a missed opportunity.

Tips to unlock your startup potential with AI

Unlocking the full potential of your startup requires staying ahead of the curve and leveraging the power of emerging technologies. While not every startup may be directly involved in developing AI, integrating AI into your business strategy can be a game-changer.

Related post: 9 Tips For What AI Can Do For Your Business

Focus on your product

It is easy to lose focus when chasing AI trends blindly. Instead, you should seek ways to improve your products and services based on genuine customer insights. Using AI can give you a competitive advantage by adding more functionality to your product.

However, before adopting an AI-powered solution, consider what your customer wants and whether an AI tool can make your product better. Taking one step back to see how AI can help you to solve your customers’ problems is crucial.

Improving internal processes

More importantly, you must use AI to improve your internal processes and workflows. The real advantage of AI is that you can accelerate your internal workflows, regardless of the industry.

You can save time using AI for content creation, coding, repetitive tasks, or report-making. Adopting AI in day-to-day business operations can be a massive boost for startups. Mainly those that are just beginning their journey with a limited budget. It allows them to save time and money and focus their resources on product development.

More effective data analysis

Using an AI-powered platform to extract meaningful insights from large volumes of data can help you to make better strategic decisions. AI solutions can help optimize marketing campaigns and sales strategies.

Although most AI tools are currently related to content creation, some AI platforms like Albert focus on a wider range of marketing tasks.

Top-notch customer service

It is not something new that companies use tools like chatbots or augmented messaging to improve customer engagement.

Although these are popular approaches, modern AI solutions offer much more value. Using machine learning and natural language processing can create more efficient customer interactions and contribute to the overall customer experience.

Machine learning is like giving computers the ability to learn and perform tasks without being explicitly taught. Instead of following strict instructions, it uses algorithms to analyze patterns in existing data. Based on historical data, it makes predictions and takes action in customer conversations.

These are all excellent ways to increase your efficiency. However, using these solutions is not a real differentiator, as your competitors can copy and implement them easily. This is the main reason why you should always focus on your product or service.

Sitting on a ticking bomb

The impact of AI is transforming industries in unique ways, with some industries experiencing a greater effect than others. An excellent example of this is the tech industry. Although there were different reasons behind the massive layoffs at Intel, many tech companies laid off employees due to AI development. They already dedicated significant resources to AI development to ensure their business model stays viable.

While the tech industry was one of the first sectors that experienced AI’s effects, it will not be the last. Many businesses may require to adapt and potentially change their current business models.

Businesses specializing in services involving extensive data analytics, data science, or business intelligence are particularly more exposed to the influence of AI. Failing to adopt could result in falling behind competitors.

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