Evan J. Renov, Cofounder & Managing Partner at Arieli Group.
Not long ago, artificial intelligence (AI) and machine learning served as buzzwords that set startups apart. Today, most investors won’t even consider an opportunity unless it leverages AI, making it rare to find a startup that doesn’t claim to use the technology.
This atmosphere is likely set to accelerate even more as massive amounts of capital flow into AI, with both the public and private sectors promoting initiatives like Stargate, a $500 billion AI infrastructure project in the United States, spearheaded by OpenAI, SoftBank, Oracle and Abu Dhabi’s MGX fund. The involvement of these firms underscores the strong conviction in AI’s transformative potential at the highest levels of the technology investment community.
AI: Not Just For The Big Players
While many heavy-hitting players are poised to reap the rewards of significant AI financing, investors like family offices and smaller investment firms should recognize that there’s plenty of room for them too.
The impact of AI cuts across industries.
Within my company’s own portfolio, companies are using AI to do everything from diagnosing life-threatening cardiac conditions to automating private market investment processes, building personalized travel maps and creating interactive digital shopping experiences.
The impact of AI extends well beyond the companies directly building AI products. Traditional sectors such as construction and real estate stand to benefit from the growing demand for data centers, while advancements in energy generation, storage and cooling technologies will be essential to support their operation. This second-order effect of AI presents a compelling opportunity for family offices and smaller institutional investors to capitalize on the broader infrastructure wave powering the AI economy.
Seeking Out Unique Solutions And Data
While AI presents a wealth of investment opportunities for both small and large investors, it is essential that family offices, high-net-worth individuals (HNWIs) and investment firms evaluate not only the upside of the many AI-related startups seeking capital but also the inherent risks and how best to mitigate them.
One of the most significant risks in today’s AI landscape is backing companies that lack a clearly defined and defensible value proposition. In 2022, the emergence of ChatGPT was a game changer. At the time, investors who had exposure to companies offering even a fraction of what large language models (LLMs) could do were considered ahead of the curve.
Today, the landscape has shifted. ChatGPT and similar tools are widely accessible—not just to companies, but to consumers as well. As a result, an “AI-powered startup” that doesn’t deliver meaningful, differentiated value raises red flags. The risk is real: Without a clear advantage over ubiquitous, off-the-shelf AI tools, these companies are unlikely to generate strong returns.
The core principle remains unchanged: Startups must offer a unique and compelling benefit. Rather than being swayed by generic AI applications, savvy investors should zero in on startups with clear differentiators, such as proprietary datasets, specialized models or domain-specific insights that are difficult to replicate.
Due Diligence In The Age Of AI
Of course, seeking out unique technology is not the only crucial component when it comes to AI investment. Smaller institutional investors, family offices and HNWIs must also be cognizant of the speed at which AI technology is being developed. The state of the industry is changing so rapidly that a family office investing in an AI-driven company today could find that its technology is already outdated six months from now or that prospective buyers of the product simply don’t have the infrastructure or skill set to use it.
Family offices and HNWIs should also conduct their due diligence to determine whether and how exactly companies are using AI. Some may be overselling the extent to which they truly are the AI company they purport to be. Are they using AI so their sales team can write emails faster or their marketing team can design images faster? That can certainly be useful and may lead to cost efficiencies, but there are many peripheral AI use cases that do not turn startups into AI companies overnight.
Equally concerning is discovering that a company isn’t exploring ways to incorporate AI into its operations or product development. Today, a lack of AI adoption may signal a competitive disadvantage—one that is likely to grow over time as peers continue to innovate and integrate AI more deeply across their businesses.
AI offers one of the most exciting frontiers for investors today—not only for the potential financial upside but for the opportunity to help shape the technologies that will define the future. For family offices, HNWIs and smaller institutional investors, success will come from more than risk mitigation; it will come from backing founders who are building truly differentiated, high-impact solutions. By approaching AI investments with curiosity, conviction and care, these investors can play a pivotal role in advancing innovation that is both commercially viable and has the potential to create enduring prosperity for humankind.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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