Amazon Web Services CEO Adam Selipsky spoke with Anthropic CEO and co-founder Dario Amodei during AWS re:Invent 2023, a conference hosted by Amazon Web Services at The Venetian Las Vegas in Las Vegas on Nov. 28, 2023. Noah Berger took the photograph.
Venture capitalists are struggling due to the highly valued artificial intelligence startups in the private market. However, these startups, like OpenAI, Anthropic, Scale AI, and CoreWeave, are not ready for IPOs to provide an exit for the investors. This is because major companies like Microsoft, Amazon, Alphabet, and Nvidia are investing heavily in them, offering not just money but also other benefits like cloud credits and business partnerships.
Due to the lack of profitability metrics needed for public investors, these startups are not pressured to go public. As a result, traditional venture capitalists are investing in AI companies higher up the stack that require less capital.
In 2024, investors put billions into generative AI deals, signaling a growing trend from previous years. However, the IPO market remains slow, with high-profile AI companies hesitant to go public unless there is a significant shift in market sentiment.
Firms like Menlo Ventures and Inovia Capital are exploring other avenues, such as raising special purpose vehicles (SPVs) to invest in high-valued companies like Anthropic and Cohere. This strategy allows venture firms to put more money into specific investments rather than a portfolio of companies.
Investment banks like JPMorgan Chase are also using SPVs to let multiple investors pool their capital into AI investments. However, for investors to see returns, there needs to be a pathway to IPOs, as secondary transactions are often used for founders and early investors to cash out.
Overall, the IPO pipeline for AI companies is expected to continue growing, but major companies are in no rush to go public. The potential for generative AI to create significant returns in the future is promising, but widespread adoption in the enterprise software sector has yet to occur.
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