AI Funding Weekly - Issue #10

Time flies - the tenth issue is here 🔥

I had to double-check the number here as it doesn’t feel like I’ve written nine issues of this Substack, but indeed I have, and here we are. I’m having a blast writing this and slowly but surely am getting new readers every week - so thanks to all my new subscribers and here’s to the next ten issues to come.

Last week The Information wrote a very interesting article about what we can learn from AI startups in Y Combinators latest batch. Right now 134 startups in YC are building applications or tools around AI, that’s 60% of the startups in the current program.

Here’s a few interesting nuggets I found interesting about where AI startups in this current batch are putting their focus:

• Over a dozen of the companies are coding-related AI startups

• Vertical-specific AI startups focusing on big industries like Healthcare or Finance are popular

• Lots of startups have their eye on open source LLM like Llama 2 from Meta

Yaz El-Baba from Emergence Capital had some good insights on why vertical-focused startups have a unique advantage:

“As you specialize, you build more of a moat and a unique advantage versus some other horizontal solutions that lack a perspective on what matters” for a specific industry, Emergence Capital principal Yaz El-Baba told me. There’s a clear precedent for this: Look at life-sciences software developer Veeva Systems, with a $30 billion-plus market cap, and the nearly-$10 billion construction software provider Procore. (Source - The Information)

And with that, I’d say we’re all warmed up - let’s talk about three awesome AI startups that landed fresh funding last week 🚀

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Imbue - $200M, Series B

Imbue’s latest round this week dominated the AI funding news cycle, and for good reason, it’s a monster Series B round coming in at $200M and with participation a list of all-star investors including Nvidia.

So what does Imbue do that has everyone so excited?

Imbue (which was actually called Generally Intelligent before this round) believes the big stoping block for AI today is a models inability to reason in a meaningful way. As we’ve all seen when using ChatGPT for more than a few minutes, the answers can stray far from correct very easily, and a lack of reasoning definitely is a blocker here.

At Imbue, we create foundation models that are tailor-made for reasoning. This means taking advantage of the powerful capabilities afforded by very large language models, while understanding in a detailed, practical way how those models are trained, and where they fail. It means creating pre-training data specifically designed to reinforce good reasoning patterns, and also developing techniques that spend far more compute during inference time to arrive at robust conclusions and actions. (Source - Imbue.com)

This is a big round for a massive vision and if Imbue is able to do what they’re aiming to do, it could change the way we use computers forever. Sounds overly dramatic? Honestly, I’m not overselling here, this is a big freakin’ deal.

. . .

Mindtrip - $7M Seed

Two days ago Mindtrip, a startup using generative AI to help with trip planning and booking announced a $7M Seed round led by Costanoa Ventures. The idea behind the product is to allow people to do things they would normally do on a travel website by inputting simple questions.

This is honestly a direction I’ve expected online travel to go. I mean before the Internet you would go to a travel agent and talk to them, tell them where you want to go, the things you’d want to do, and they’d plan a trip for you.

Fast-forward to today, and all of us have become our own travel agents, responsible for researching and manually booking our trips.

“Watching the evolution of who is traveling and how they plan … we saw an opportunity to create one place where people could combine the ability to discover, plan and book,” said Andy Moss, co-founder and CEO of Mindtrip, in a statement. “Where ChatGPT stops at text suggestions, Mindtrip incorporates photos, maps, pricing and availability data that lets someone actually plan and book their complete travel itinerary leveraging generative AI.”  (Source - Skift)

Having tried to get travel assistant from ChatGPT more times than I can count, I can tell you a solution like this is definitely needed. As a frequent traveler, I’m pretty excited about this one, and I signed up for the beta so I hope they pick me 🤞

. . .

CLARA Analytics - $24M Series C

Ah the insurance industry - a huge space with ton of complicated regulatory hurdles to get past when it comes to technology adoption. Which means once you’re in and scaling, you can be in a league of your own in many ways.

That seems to be the case for CLARA Analytics, who uses AI to predict and prevent claims escalation. The company has seen strong customer growth and doubled its annual revenue, so the timing for this round certainly makes sense. One of their investors had some good insight into why CLARA is seeing the success that they are right now:

Jeff Williams, partner at Spring Lake Equity Partners, said in the release that CLARA Analytics’ AI platform is the “missing ingredient” that enables carriers and self-insured companies to control escalating loss costs. Williams believes the company is well-positioned to dominate this space due to its focus on claims optimization and its ability to deliver a substantial return on investment for its customers. (Source - Pymnts.com)

This type of vertically-focused AI startup, like The Information mentioned above, has so much potential because they can zero in on a specific problem that an industry has, and one that currently isn’t being solved by technology in an efficient way.

There are so many companies that have graduated from Excel to algorithms, but the next move is from these stale algorithms with static rulesets to dynamic models that can learn, change, and adapt.

. . .

Okay that’s a wrap, as always - thanks for reading, tell all your friends about my Substack, and I’ll see you next week 🫡

Follow me on X @morganlinton or check out more articles from my blog at MetaverseMorgan.com.