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The AI startup market is spread out, from companies looking to develop new chips, to those using AI to build robots, to others looking to use AI to create niche solutions for specific workflows of the industry. There are many potential areas for venture capitalists to invest in, but there are clearly a few subsectors that they are more excited about than others.
TechCrunch recently investigated 20 VCs investing in startups trying to sell to companies on their predictions for 2025.
Mark Rostick, vice president and senior general manager of Intel Capital, told TechCrunch that now that the big foundation models have been established – at least in his opinion – the next interesting area to invest is AI solutions for specific tasks.
“I find models that excel at specific functions particularly intriguing, especially when combined with agents built on top of them,” Rostick said. “As AI adoption accelerates, application-focused companies are taking center stage as CEOs increasingly look for ways to leverage AI in specific areas that deliver tangible, transformative impact” .
This was echoed by Mike Hayes, managing director of Insight Partners. He added that he would seek to support companies that build products that use AI to reduce business friction.
“I look for solutions that solve unique and orthogonal challenges for businesses – areas where traditional solutions have fallen short,” Hayes said. “This includes vertical and person-specific workflows reimagined with GenAI or agent automation and security innovations that not only identify and warn, but also remediate.”
VCs interested in going after companies that target specific enterprise use cases should make sure that these startup solutions are actually companies, as opposed to just features. Otherwise, we could see a repeat of the SaaS boom in 2021, when many companies that were really one-note functions raised a lot of venture capital before. be left behind in favor of companies that offer platform solutions when company budgets contract in 2023.
There are of course tasks that are important enough to warrant a unique solution. For SaaS, we have heard that companies will always pay for companies that offer specific cybersecurity solutions. For AI, what specific solutions companies will be willing to pay for is not clear. Ed Sim, the founder and general partner of Boldstart Ventures, recognized this challenge.
“The trick is to skate where the puck is going to be and also think about is this a feature, or a product, or a business,” Sim said.
Another area that VCs are excited about is reliability and resilience. Jason Mendel, an investor at Battery Ventures, said he looks to invest in companies in the observability and reliability space. Liran Grinberg, the co-founder and managing partner of Team8, also has his views on what he calls “enterprise resilience”.
“The Crowdstrike software update incident showed how fragile our digital world is, not just because of cyber attackers, but also just because of mistakes,” Grinberg said. “We need a more resilient digital infrastructure, anti-fragile by design.”
AI infrastructure will also remain a hot area of investment in 2025. VCs have mentioned that with advances in AI agents, they are looking for the necessary infrastructure for companies to adopt the technology in addition to the ‘companies that can help calculate prices for AI agents as well. .
“It’s still very early innings here, and I believe the momentum for AI infrastructure will continue into 2025, especially as agent frameworks proliferate, new modeling paradigms (including reasoning) develop, the advancement of cutting-edge AI, and the UI/UX of AI applications are evolving (including computer usage),” said Janelle Teng, vice president of Bessemer Venture Partners.
