AI Startups Turn to Retail Investors To Fund the Growth of the $1.59 Trillion Artificial Intelligence Market

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With the rise of ChatGPT and similar artificial intelligence (AI) tools on the horizon, the AI market has massive potential.

A report from Precedence Research estimates the global AI market will grow to over $1.59 trillion by 2030. That number represents a 38.1% compound annual growth rate from 2022, which might prove low given AI’s expected role in most facets of everyday life.

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Alphabet Inc. (NASDAQ: GOOGL) plans to integrate its generative AI into Google Workspace and its suite of collaboration and business tools, including Gmail and Google Meet. In AI, “generative” means a platform that can create new and original content, whether it’s country music lyrics or a model of a new automotive part.

The AI algorithm enables it to pull from massive data sets to create something out of the user’s provided parameters. Alphabet’s stock rose on the March 15 announcement, a day when the broader market declined because of the ongoing banking crisis. In February, Alphabet announced a $400 million investment in Anthropic, which recently launched its chatbot Claude to rival ChatGPT. Company representatives note Claude is “much less likely to produce harmful outputs,” “easier to converse with” and “more steerable” than ChatGPT, a claim millions of users will soon put to the test.

Where one tech giant operates, the others are also in the mix. Microsoft Corp. has a $10 billion multiyear partnership with OpenAI — the company behind ChatGPT — that includes Microsoft Azure as the exclusive cloud partner for the AI tool. Microsoft integrated ChatGPT into its search engine Bing to make inroads into Google’s search dominance and provide users with a new AI-powered experience. OpenAI announced the latest version of its chat platform, GPT-4 on March 14, which helped boost Microsoft’s share price.

While it’s clear Silicon Valley and Wallstreet have been pouring money into AI, another unexpected group of individuals are getting in on the action as well. Retail investors have been investing millions into AI startups like RAD AI and Atombeam. RAD AI has raised over $3.1 million from retail investors for its current Wefunder raise to scale its AI marketing platform. AtomBeam’s StartEngine campaign has already cleared $1.2 million for it’s patented AI data compaction platform.

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AI For Marketing Offers Best Revenue Potential

A McKinsey & Co. report on the state of AI in 2022 found a shift in the areas of business that benefited the most from AI implementation. It said in 2018, manufacturing and risk management were the two business functions that the largest share of respondents noted the most value from AI. But the 2022 report found marketing and sales had the highest ratios of cost decreases to revenue increases after adopting AI.

The McKinsey data supports the increased adoption of marketing-focused AI and the growth of related startups.RAD AI is using AI to improve marketing campaigns — especially influencer marketing. AI is perfect for marketing purposes because it can spot trends in real-time from giant data sets and offer predictive analytics for future actions.

RAD AI uses its tech for building creative intelligence. Its proprietary platform gauges the predicted performance of campaigns so they can adjust their content mediums and select the right influencers to spread marketing messages. It reviews hundreds of application programming interface (API) partners and Reddit to match influencers to a client’s strategy. The AI ranks influencers by predicting their performance based on a given customer persona. This enables brands to benchmark influencer marketing performance across various channels, save time and improve return on investment.

AI Data Compaction

The applications for AI are limitless, but AtomBeam seems to be another AI startup retail investors have been investing significant sums into. AtomBeam’s current raise has cleared 1.2 million from retail investors, and they previously raised another $2.45 million.

The startup uses AI to code and decode data for storage and transmission, reducing bandwidth and storage requirements by as much as 75% in ‘nearly any connected device.’ This means satellites can transmit more data, cancer researchers can decode genomes faster, and our connected devices are faster.

AtomBeam’s customers include Saab, USAF and blockchain company CrowdPoint, and partners include Lockheed Martin, Inmarsat, Intel and Cribl.

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VC Funding Slowed Even For Red-Hot AI Firms

Despite the AI market’s rapid growth and limitless potential, venture capital (VC) funding for AI is slowing. Global AI startup funding fell to $8 billion in the third quarter of 2022. Some of the slowdown was a natural correction from the outsized investments during the 2021 pandemic-driven record VC investment. The rise of retail investors and the growth of equity crowdfunding also explain VC’s lowered involvement, as companies can turn to individual investors to raise considerable sums. During 2022, VC funding slipped across the board because of rising interest rates and economic uncertainty.

In 2016, the investing landscape shifted with the Jumpstart Our Business Startups (JOBS) Act, which enabled anyone to invest in startups. Previously, individual investors — outside of the very wealthy — could not invest. The legislation created the equity crowdfunding market led by firms like Wefunder, StartEngine and Republic.

VC funding continues to wait for a rebound as broader the stock market decline and higher cost of capital restrict funds’ willingness to invest. AI startups like RAD AI and AtomBeam are not waiting for VC funding to capture market share. Instead, the company turned to the crowd to present retail investors with a unique opportunity.

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