Funding AI Startups by Investing in People and Creating Apps that Matter
Insights from The AI Optimist Podcast #17
00:00:00 - The Studio Model for Tech Investments
00:02:13 - Building the Network
00:04:38 - Running a Small Business and Supporting Minority Entrepreneurs
00:06:51 - The Importance of a Studio Environment
00:09:00 - Creating a Mapping Application from Scratch
00:11:20 - Simplifying Tasks with AI
00:13:39 - The Practicality of Using AI in the Workplace
00:15:53 - The Power of Personification
00:18:06 - Enabling Natural Conversations with AI
00:20:22 - Manufacturing Drugs in Space
What if the Motown of Tech could outperform VCs in Silicon Valley?
This week, we continue our fascinating dive into the possibilities of AI coming up from the open source and startup areas.
With William A. Adams’ WAAV Studio as a model, he focuses on investing in small companies with small amounts of capital that fuel growth.
He likens it to Stevie Wonder joining Motown – Stevie knows how to play music and perform; Motown helps him with resources to further his talents and a network of connections to further his career.
Now, replace musicians with tech- and human-driven businesses that use AI and need resources, guidance, small amounts of capital, and a network to connect with others.
With AI, these don’t require deep pockets as much as a belief in people. Unlike big investors building companies to go IPO or be acquired, these new companies solve problems.
William is tapping into generational wealth that can now act a little like Silicon Valley, placing $100K bets on companies with the few who succeed in delivering results that have never been seen before below the multibillion trillion-dollar mentality of Silicon Valley.
Big Tech and the trillion-dollar chase aren’t the only Stories – AI empowers small businesses.
Billion-dollar companies and unicorns dominate the headlines, led by Big Tech companies lobbying for control via regulations and selling fear. Move beyond that hype, and you see a creative and unleashed force of human ingenuity outside these power centers.
Today, an AI startup doesn’t need tens of millions of dollars to get started, and how they are funded and executed isn’t like the old days. We’re talking lean, agile, and empowered by AI to do the work that used to take thousands of engineers and too much time.
William also shares how he created a conversational map for his brother alone in the Virgin Islands. This mapping technology allows a non-tech user to talk to the program, get results, and have a grant document created and emailed to the right person.
Instead of multiple employees and uber-expensive consultants, William’s creation is an example of what is possible today. Technology can free us from restraints and is not a threat to replace us as much as streamline and give us capabilities we never could afford.
AI Startups Beyond VCs - The Motown of Tech Studio Investing in People
The podcast begins by discussing the funding gap many early-stage AI startups face. Venture capital funding focuses on established startups poised for fast growth leading to IPO or acquisition, an exit.
Smaller entrepreneurs need access to the capital and resources they lack in the early days. They focus on helping people with specific products and solutions that likely will never go public.
But unlike the pre-AI business world, the money needed is comparatively tiny for ample opportunities today.
William explains his WAAV Studio, a “Motown of Tech” studio model that provides nurturing, ongoing support for startups instead of just placing risky bets.
He connects startups to capital, customers, mentors, and the practical knowledge needed to run a business successfully.
The conversation turns to a case study of an AI conversational interface William built. For a mapping application in the Virgin Islands, he enables voice control so users with no technical expertise can access complex mapping capabilities just by speaking.
This simplifies the user experience and saves enormous consulting fees while automating the grant writing process.
William leverages AI tools like GitHub’s Copilot to accelerate the programming and ingest complex data formats. Then, a conversational interface with speech recognition and natural language processing handles the user’s spoken requests to access features like calculating fiber optic cable routes.
Critical Takeaways for Startups Seeking Funding
William’s WAAV Studio model offers an intriguing alternative to traditional VC funding that benefits early-stage AI startups:
Seek micro funding instead of chasing VCs - Smaller capital funds initial product development and orders without crazy growth projections. William shares an example of a small loan in India for wedding scarves that fueled ongoing growth and reinvestment based on performance instead of future revenue predictions.
Find local supporters - Connect to your community’s individuals and groups for capital and support. William suggests engaging local investors, family offices, small funds, and studios, which can be more accessible than control-driven VCs.
Leverage networks - Studios like WAAV introduce startups to potential customers, experts, and mentors who guide development and growth. These networks are as valuable as the capital.
Embrace a nurturing mindset - Studios provide ongoing support and encouragement when startups encounter obstacles. This contrasts with VC models that quickly abandon failures to double down on big successes.
Fill knowledge gaps - Studios help provide practical guidance on running a business, like legal, accounting, and HR issues that first-time entrepreneurs may need more. Don’t let back-office details trip up a promising idea.
By embracing alternative funding approaches like William’s WAAV Studio, AI startups get support tailored to their needs and get the chance to grow sustainably.
Micro funding is poised to be a true disruptor in the AI market for several reasons:
Lower Capital Requirement for Startups: AI startups no longer need massive capital to begin and grow, making the sector more accessible to entrepreneurs with innovative ideas but limited resources.
Democratization of AI Development: This approach facilitates a diverse and inclusive AI landscape. It allows for many voices and perspectives to contribute to AI development, fostering innovation that better reflects and serves a broader user base.
Global Access and Opportunity: Micro funding spreads AI opportunities worldwide, particularly benefiting regions previously overlooked due to lack of funding. This global reach can spur creativity and unique applications tailored to various cultural and socio-economic contexts.
The AI Investment Bubble: Navigating the Shift from Billion-Dollar Bets to Micro funding Strategies.
Artificial Intelligence (AI) has skyrocketed in recent years, with a surge in investments by tech giants like Google and Microsoft leading the way.
These companies pump billions into AI development, believing AI is the future of technology. For example, Google’s parent company, Alphabet, invested approximately $6.85 billion in AI and machine learning in 2021 alone. Microsoft’s investment in OpenAI, creators of GPT-4, reportedly totaled $1 billion in 2019.
This investment frenzy fuels a race to dominate the AI market, expecting to revolutionize every aspect of our lives, from healthcare to transportation.
The AI Bubble Phenomenon – Moving Beyond the Enterprise-Centric Vision
Historically, technology bubbles are driven by excessive optimism and overvaluation, followed by a sharp correction. Two factors contribute to the current AI investment bubble:
Decreasing Training Costs: The costs associated with training AI models are predicted to drop significantly in the coming years. This shift makes AI more accessible, reducing the need for massive capital investments.
Overfocus on the Enterprise Market: There’s a lopsided focus on enterprise-level AI solutions, leaving a vast, untapped market of smaller businesses and other sectors.
The overemphasis on the enterprise sector in AI investments overshadows opportunities in smaller markets.
Small and medium-sized businesses (SMBs) form the backbone of many economies. They need to be included in the current AI big tech zealotry.
This oversight presents a significant opportunity for investors and developers to create AI solutions tailored to these markets. Addressing the specific needs of SMBs, such as affordable, user-friendly AI tools for customer relationship management or inventory optimization, a new wave of AI applications emerges.
WAAV Studios: A New Studio Paradigm Investing in People
WAAV Studios’ approach, focusing on people-first investing with smaller capital injections, is a micro-funding solution. This model starkly contrasts the deep pocket characteristic of the initial wave of AI investments.
Microfunding allows for a diverse range of ideas to be explored, not just those requiring substantial initial capital. By lowering the financial barriers to entry, WAAV Studios enables a broader spectrum of entrepreneurs to bring their AI visions to life.
When will the AI Bubble burst?
The current AI investment landscape, dominated by billion-dollar bets from major tech players, is on the brink of a transformation. The bubble, characterized by the overvaluation and intense focus on large-scale enterprise solutions, is poised to burst as training costs plummet and the market adapts.
The shift toward micro-funding, exemplified by WAAV Studios’ approach, offers a fascinating alternative. This model promises to democratize AI, reduce barriers to entry, and deliver innovative startups globally. The AI sector fosters a more inclusive, creative, and sustainable future by embracing micro-funding.
Small businesses leverage AI effectively despite limited resources by focusing on specific, targeted applications that enhance their operations or customer experience. Here’s a step-by-step approach:
Identify Key Needs: Identify areas where AI brings impact, such as customer service, marketing, or inventory management.
Use Off-the-Shelf Solutions: Small businesses can utilize existing AI tools and platforms instead of custom development. Many are user-friendly and cost-effective.
Focus on Incremental Improvements: Aim for incremental changes that bring immediate benefits, such as chatbots for customer service or AI for personalized marketing.
Partner with AI Providers: Forming partnerships with AI providers gives access to expertise and advanced technologies without significant investment.
Monitor and Adjust: Continuous monitoring and adjustment of AI tools ensure they meet the evolving needs of the business.
AI Use Case Study: Virgin Islands Mapping AI
Conversational Maps Driven by Voice Commands and Creating Grant Proposals
William shares his approach to solving a problem for his brother, a non-tech CEO interested in expanding fiber optic infrastructure in the Virgin Islands.
The CEO interacts with conversational AI by saying,
“I need an assessment for laying fiber optic lines in the Virgin Islands, including cost, benefits, challenges, and next steps. Also, prepare a grant proposal based on the findings.”
The AI gathers data on the Virgin Islands’ current infrastructure, potential routes for fiber optics, and relevant environmental and regulatory considerations.
It calculates the estimated costs potential economic and connectivity benefits, and outlines challenges like terrain or regulatory hurdles.
After completing the analysis, the AI begins drafting a grant proposal. It organizes the information into the required format, ensuring all grant criteria are met, including detailed documentation on the assessment findings.
Once the draft is ready, it seeks the CEO’s final approval through a simple voice command.
Upon approval, the AI finalizes the document and automatically emails it to the grant committee for review, completing the process.
Tech Power Without Requiring Tech Skills to Run It
This strategy showcases how a conversational AI streamlines complex tasks like assessing infrastructure projects and grant writing, even for users who need more technical expertise.
AI is a complete tool for performing detailed analyses and completing administrative tasks, a significant leap in AI-assisted decision-making and project management.
Here’s a step-by-step strategy using the example of a non-tech CEO needing to determine where fiber optic lines are in the Virgin Islands, assess costs, benefits, challenges, and next steps, and then submit a grant proposal:
Develop an Intuitive Conversational AI Interface:
The AI runs by voice interaction, allowing the CEO to communicate with it.
It understands and processes natural language, making it user-friendly for non-tech individuals.
Integrate Advanced Data Analysis and Mapping Capabilities:
The AI accesses comprehensive data on fiber optic networks, regional geography, and infrastructure in the Virgin Islands.
Implement Geographic Information System (GIS) capabilities for accurate mapping and assessment.
Cost and Benefit Analysis:
The AI automatically assesses costs by analyzing data on infrastructure, labor, materials, and other relevant factors.
It evaluates potential benefits, like improved connectivity, economic impact, etc.
Automated Grant Writing:
The system drafts grant proposals, analyzes standards, and delivers all requirements for review by the CEO.
It is programmed to understand and follow specific grant criteria and guidelines.
Integration and Workflow Automation:
The AI integrates findings from the assessments and maps them into a coherent grant proposal format.
It compiles, formats, and emails the completed proposal to the grant committee.
Tips for Conversational AI Interface Design
William’s conversational map application demonstrates best practices for making AI systems intuitive and friendly through voice interfaces:
Leverage AI for development - Using tools like Copilot to generate code accelerates building conversational systems. It frees developers to focus on creative design.
Plan for non-technical users - Conversational UIs allow users with no specialized knowledge access.
Support natural interactions - Let users make requests in natural language, not rigid code commands. AI translates requests into actions.
Design for multi-modal use - Don’t force voice-only input. Allow seamless switching between conversation, typing, clicking, etc., to suit user needs.
Break app limitations - Conversation interfaces don’t limit users to single-purpose apps.
Reduce consulting needs - Conversational AI provides access to complex resources without expensive consulting projects and training.
By first focusing on an intuitive conversational interface, designers create AI systems that unlock value for a broader range of people. Natural language understanding bridges technical complexity.
Summary and Next Steps
Funding AI startups with alternatives like William’s studio model and embracing conversational interfaces are practical ways to make AI more accessible.
Startups build sustainable businesses, and designers enable users to interact with AI systems naturally. AI augments humans and doesn’t replace them!
The funding conversation highlights a vital context - the massive investments made by tech giants into AI startups focused on huge enterprise markets.
This first wave of billion-dollar valuations and deals risks creating a bubble, as William suggests.
The funding environment remains challenging for AI startups not focused on these narrow enterprise plays.
Traditional VCs may seek the next big payout, while smaller startups need access to capital to prove their ideas.
This is where William’s studio model and emphasis on community funding sources offer compelling chances. By connecting to local investors, small funds, and regional networks, startups get the micro-funding and support they need for those critical early steps.
Rather than prematurely pursuing VC mega-deals, AI startups should:
Tap into local connections and groups for capital, support, and feedback. Founders often overlook community resources close to home.
Be strategic with small amounts of funding. Validate assumptions before raising too much.
Build a loyal user base and customers, even if niche. Traction proves value.
Open-source key components when possible to attract a developer community.
Identify gaps holding you back, like legal advice or cloud resources, and seek targeted help. Studios can assist with making connections.
Participate in summits, showcases, and networking events to meet collaborators and mentors.
The future success of AI rests not just on billion-dollar monopolies but on an ecosystem of startups innovating in unexpected ways.
Small AI startups will thrive outside the media spotlight by accessing micro-funding and support tailored to their needs.
This is why, in Episode 16, William finds the innovation coming from Africa and India, solving societal problems, as the promise of AI.
Everyone will access the AI tools, computing power, and efficiencies of AI without needing millions of dollars and years to get going.
AI is leveling the tech playing field beyond unicorns to small businesses delivering needed tools to customers.