Venture Capital firm Ascend has raised a $25 million pre-seed fund to invest in Artificial Intelligence (AI) startups.
The company’s pre-seed fund raising was led by seasoned startup operator and angel investor Kirby Winfield. With the new fund, Ascend is placing a bigger bet on artificial intelligence, joining other venture capital firms investing money into the growing sector boosted by recent generative AI advancements.
Founding General Partner at Ascend Kirby Winfield disclosed that the firm will invest in pre-seed AI and Machine learning (ML) companies largely based in the Pacific Northwest.
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Speaking on investment in AI startups, Winfield said,
“AI is having a platform-shift moment. It would be irresponsible not to double down. I would imagine that is probably another downward correction in valuations in the next year. We have become even more convicted around investing at pre-seed. This is where we want to play. We want to take more ownership at that stage. We have really found some conviction around our thesis”.
The fund raised in the pre-seed round was 100% from individuals and consists of two vehicles, one that raised $22.5 million and another that raised $2.5 million from existing portfolio company founders. Ascend CEO Windfield raised a majority of the new fund at the beginning of 2022, just before the startup funding dried up amid the tech downturn.
Speaking on his investments in AI startups, Wingfield said that he isn’t looking for AI companies to invest in, but instead is focused on startups that will utilize the tech to find a better solution to problems.
In his words, “AI doesn’t matter, what matters is the solution you are selling to your customers. Many founders and investors are getting wrapped around the axle and putting the technology and solution before the benefit”.
Winfield expects to invest in around 40 companies from the new fund, which will also target startups building e-commerce infrastructure and B2B software. It is interesting to note the AI industry has been poised to grow to an estimated $126 billion by 2025. Today, AI has become essential for an increasing number of businesses as remote work and reliance on technology are the new daily norm.
According to a survey conducted by Accenture last month, 63% of organizations are now prioritizing AI over all other digital technologies. The survey shows that more than half of companies are investing more than 5% of their digital budgets in AI. Sixty-three percent, meanwhile, say that they expect their investment to increase over the next three years.
Subsequently, generative AI startups are rapidly gaining traction, and venture capital investors are keen to capitalize on their potential. Investors this year have been pouring funds into companies specializing in generative AI systems that can create humanlike conversation, imagery and computer code.
Major tech companies such as Meta, Google, and Microsoft are investing heavily in generative AI research in hopes of achieving a breakthrough that would put them at the forefront of the race.
The heat around AI deals has intensified so much that many investors are worried the startups will falter due to the pressure to deliver. Several investors have disclosed that startups raising seed rounds are pushing for valuations of tens of millions of dollars or more. Some companies are raising back-to-back rounds of funding.
Analysts at research firm PitchBook predict that venture investment in generative AI companies will easily be several times last year’s level of $4.5 billion.