How To Invest in AI Startups

The post How To Invest in AI Startups by Omar Sacirbey appeared first on Benzinga. Visit Benzinga to get more great content like this.

Artificial intelligence may be the fastest growing industry in the world right now, and startup investors seeking explosive growth would do well to acquaint themselves with this exciting but complex sector.

Consider some of the best-known AI startups, such as Anthropic, whose valuation was estimated to be $183 billion in September 2025, and ChatGPT maker OpenAI, whose March 2025 valuation was around $300 billion. Their rapid valuations illustrate the opportunities that investors have in AI startups, especially when they get in early.

Some AI companies are already publicly listed, such as C3.ai and Palantir Technologies, while many long-existing companies that are publicly traded, such as Alphabet, IBM, and Nvidia, have AI divisions or rely heavily on AI. It’s important to contrast buying AI stocks vs. investing directly in AI startups.

This article covers how to invest in AI startups, including how to evaluate them and the key risks to consider.

Why Consider Investing in AI Startups?

The AI sector is already growing at a rapid pace. Business consulting firm Grand View estimates that the industry, valued at $279.22 billion in 2024, will soar to $1,811.75 billion in 2030, with a compound annual growth rate of 36%.

In a short period of time, AI is already having a disruptive impact across important and diverse sectors, such as healthcare, finance, and robotics, with the possibility of high returns for early investors.

But for all its advances and the billions of dollars that have already been invested, AI is still very much in its early stages. That means that there will be many more new companies, and for startup investors, many new opportunities.

Those opportunities do need to be thoroughly scrutinized, however. Investing in startups, especially in a brand new industry about which relatively little is known, carries significant risks, such as oversaturated markets, technological failure, and government regulation.

Ways To Invest in AI Startups

You can get into AI startup investing either as an accredited or non-accredited investor, depending on your income and assets.

To qualify as an accredited investor, an individual must have either a minimum annual salary of at least $200,000, or assets of more than $1 million, not including the individual’s primary residence. To qualify as an individual with a spouse, the minimum annual salary required is $300,000, or assets of at least $1 million, not including the couple’s primary residence. 

While the bar is high to become an accredited investor, they have many more opportunities to invest than non-accredited investors.

Angel Investing in AI Startups

Whether they’re accredited or non-accredited, angel investors provides capital in exchange for equity in a startup, betting that the business will grow over time and eventually have an “exit event” such as an initial public offering (IPO) or acquisition where investors can realize their returns. That is if the company survives. Most startups, including in the nascent AI industry, still fail.

AI Venture Capital Funds

Venture capital funds, which are pools of money from high-net-worth individuals that are managed by venture capital firms, are typically only open to accredited investors.

If the fund and the VC firm running it are small enough, investors may be able to get direct access. Another option is through a syndicate or network of investors who pool their money for allocation in a VC fund. Minimums for VC fund investment are usually $75,000 to $1000,000, but can often be more.

Firms with dedicated AI funds that provided access to professionally managed portfolios of startups include Sequoia Capital, Andreessen Horowitz, and Khosla Ventures. 

Other options are secondary marketplaces like Nasdaq Private Market, which allow accredited investors to trade private company shares, including those of AI firms like OpenAI.

AI Startup Crowdfunding Platforms

For non-accredited investors, the most common route for investing in start-ups is equity crowdfunding. Some of the better known platforms where non-accredited investors can back AI startups are SeedInvest, Republic, and StartEngine. Minimum investments vary. For example, Republic’s minimum is $50, and at SeedInvest it’s $500.

Non-accredited investors can also make angel investments in startups through so-called Regulation A+ stock offerings, whereby private companies offer unregistered stock and need to meet less stringent reporting and disclosure requirements. 

Indirect Investment Through AI ETFs and Public Companies

Investors who don’t wish to access private deals can still get in on the AI rush through exchange-traded funds and established AI stocks. There are at least a few dozen AI ETFs and well-known publicly traded AI companies, such as C3.ai, Palantir, and Veritone. Numerous technology companies, including Nvidia and IBM, have their own AI divisions. The returns are much more modest, but so are the risks.

How To Evaluate AI Startups Before Investing

Whichever options investors choose, they will need to thoroughly scrutinize any AI investment they make, focusing on several important criteria.  

Market Opportunity and Scalability

Aspiring investors need to assess whether the AI startup addresses a relevant market that’s big enough and can grow. They also need to know if there are competitors and what kind of customer traction their potential AI investment target has been garnering.

Founding Team and Technical Expertise

A startup’s founding team, C-suite executives, and overall staff are critical to a new business’s success. Investors should thoroughly research founders’ and executives’ backgrounds and track records to make sure they’re fit to lead the company through the most challenging early phases. Domain expertise should be a given.

Business Model and Monetization Strategy

It’s important to know whether an AI startup has a viable business model and monetization strategy. To figure that out, ask these important questions:

• What is the company’s unique value proposition?
• What is the revenue model, i.e., licenses, subscriptions, or something else?
• How big is the target market, and how do you reach it?
• How do you gain customers and keep customers?

Answering these questions puts you well on your way to understanding a startup’s potential risks and rewards. 

Funding Stage and Valuation

It’s important to understand how early vs. late-stage investments impact risk, ownership, and potential returns. Generally, the earlier the stage, the higher the risk because the company is still unproven, but higher the reward, as equity is less expensive earlier in a company’s life.

The earliest stage investment rounds are known as seed rounds, and are typically made when the startup is still in the idea stage or just getting started. Series A, B, and C rounds are made after a company has a proven track record, or at least that its business plan is viable. Accredited and non-accredited investors both can make seed round investments, but the larger, later-stage investments are typically made by venture capitalists.

Risks of Investing in AI Startups

AI startup investing is speculative and has many risks, including high failure rates, regulatory uncertainties, competition, and technology scaling challenges. 

Because AI is still so new, governments around the world have yet to write or implement regulations governing AI. Governments could come up with regulations that significantly curtail its use, or that force businesses to make expensive changes to their technologies. 

Another downside to AI being so new is that there is little data about its usage by individual and corporate customers, and what data does exist is fragmented.

The AI landscape is also extremely crowded, with competition coming not only from new AI companies, but existing technology giants that already have immense resources and talent at their disposal.  

Deciding Your AI Investment Route

AI startup investing could be the most compelling variant of investing for years, as the industry itself is a startup. The technology stands to transform scores of important sectors – health and medicine, finance and business, transportation and infrastructure, defense, and more – and thereby transform the world.

But there may be thousands of AI startups aiming to be one of those transformative companies in a highly competitive landscape that allows very few to survive. It will be up to investors to familiarize themselves with the industry and individual businesses so that they back those AI winners in this exploding field.

Frequently Asked Questions

The post How To Invest in AI Startups by Omar Sacirbey appeared first on Benzinga. Visit Benzinga to get more great content like this.