5 Practical Tips for Investing in AI Startups in 2023
Written by  Daisie Team
Published on 6 min read


  1. Analyze the founder's background and experience
  2. Evaluate the AI product and its market potential
  3. Check the financials and funding history
  4. Consider the competitive landscape
  5. Seek legal advice before investing

Is it smart to invest in AI startups in 2023? Here's an answer you might not expect: it depends. Yes, artificial intelligence is a hot trend, with AI stocks gaining recognition for their long-term value potential. But investing in AI startups? That's a whole different ball game. In this blog post, we'll be exploring some practical tips to help you make an informed decision. So, grab a cup of coffee, sit back, and let's dive right in!

Analyze the founder's background and experience

When looking at AI startups, the person or team behind the idea can often tell you more than the product itself. A founder's background and experience are like a preview of what's to come. So, let's break this down further.


What did they study? While it's not a hard and fast rule, founders with a background in computer science, data science, or a related field often have a solid understanding of AI technology. They're likely to have the know-how to build innovative products. But remember, great founders can come from all walks of life. So, don't put too much weight on this alone.

Track record

Have they started a successful company before? While past success doesn't guarantee future wins, it might hint at a founder's ability to navigate the rocky startup landscape. It's also worth considering if their past ventures were in the AI space. This could indicate a deep understanding of the market, which is a definite plus when you're wondering if it's smart to invest in AI startups in 2023.


Who do they know? In the world of startups, connections can open doors. Founders with a strong network might find it easier to secure funding, attract talent, and win clients. So, take a look at their LinkedIn or other professional networking sites to get a sense of their connections.

Passion and dedication

Building a startup is hard work. It requires a level of commitment and passion that's beyond the norm. Does the founder have a clear vision for their product? Are they dedicated to seeing it through? These qualities can make a big difference in a startup's success.

By analyzing the founder's background and experience, you can start to form a picture of their potential for success. It's a key piece of the puzzle when you're deciding whether it's smart to invest in AI startups in 2023.

Evaluate the AI product and its market potential

So, you've looked at the founder's background and experience. But what about the product? After all, even the most dedicated founder can't make a bad product succeed. Here's what to consider when evaluating an AI product and its market potential.

Product Innovation

How unique is the product? A truly innovative AI product—one that solves a problem in a new or better way—can be a game-changer. But a "me too" product that's just a copycat of existing solutions? That's a hard pass. So, ask yourself: Does the product bring something new to the table?

Market Size

Who would buy this product? Are there enough potential customers to make the business viable? And is the market growing? A big, expanding market can be a strong signal that it's smart to invest in AI startups in 2023.

Product-Market Fit

Does the product meet the needs of its target market? This is what we call product-market fit. When a product fits the market like a key in a lock, customers will be lining up to buy it. To figure this out, you might want to check out customer reviews or talk to people in the target market.


Can the product scale? In other words, can the startup serve more customers without a big increase in costs? This is critical for a startup's growth and profitability. If the product is highly scalable, it could be a good sign for potential investors.

When you're trying to decide if it's smart to invest in AI startups in 2023, don't forget to take a close look at the product and its market potential. A great product in a growing market could be just the opportunity you're looking for.

Check the financials and funding history

So, you've scrutinized the product and its market potential. But the question remains—is it smart to invest in AI startups in 2023? Let's take a look at the financials and funding history of the startup to find out.

Financial Health

First off, does the startup have its financial house in order? Are revenues growing? Are costs under control? Startups are notorious for burning through cash, but they should also have a plan to become profitable. A startup with sound financial health can be a more secure investment.

Funding History

Next, check out the startup's funding history. Have well-respected investors put money into the startup? If they have, that's a good sign. They do their homework before investing, so their confidence can be a positive signal. Also, take note of the funding rounds. A startup that's gone through several rounds of funding is likely growing and hitting its targets—another positive sign.

Cash Runway

Last but not least, consider the startup's cash runway. This is how long the startup can keep running with its current cash balance. The longer the cash runway, the more time the startup has to hit its growth targets or raise more funding. A short cash runway can be a red flag, signaling potential financial difficulties ahead.

So, when you're pondering if it's smart to invest in AI startups in 2023, don't forget to check the financials and funding history. In the end, these could be the deciding factors in your investment decision.

Consider the competitive landscape

So, you've done your homework on the financial side of things. Now, let's address another vital question - is it smart to invest in AI startups in 2023, considering the competitive landscape? Here's how to go about it.

Identify the Main Competitors

Firstly, you need to know who the startup's main competitors are. Are they up against tech giants, or is it a sea of other startups? Knowing the competition helps you understand the challenges the startup might face. Remember, a crowded market can be tough for a young company to stand out in.

Analyze the Competitive Advantage

Next, does the startup have a clear competitive advantage? This could be a unique technology, a better business model, or a strong team. Such an advantage can be a game-changer. It can help the startup take on competitors and carve out a niche for itself.

Assess the Market Position

Lastly, where does the startup stand in the market? Is it a leader, a follower, or a challenger? Ideally, you'd want to invest in a startup that's leading or has the potential to lead. Such a startup is more likely to succeed and give you a good return on your investment.

So, when you're considering if it's smart to invest in AI startups in 2023, be sure to consider the competitive landscape. It can give you valuable insights into the startup's potential for success.

Perhaps you've weighed all the factors and believe it's smart to invest in AI startups in 2023. Before you dive in, there's one more thing to do — seek legal advice. This might seem like an extra step, but it can save you from potential pitfalls down the line. Let's uncover why this is important.

Understanding the Legalities

First off, investing in startups involves complex legalities. These include understanding the terms of the investment, the rights you get as an investor, and the potential risks involved. A legal advisor can help you navigate these complexities and ensure you're making an informed decision.

Negotiating the Terms

Once you understand the legal terms, you might want to negotiate some of them. Maybe you want a higher share in the company or better protection of your investment. A legal advisor can guide you through this process, helping you secure a deal that suits your needs.

Protecting Your Investment

Lastly, and most importantly, a legal advisor can help protect your investment. They can ensure the startup isn't violating any laws that could jeopardize your investment. Furthermore, they can help set up safeguards to protect your investment in case the startup doesn't do well.

So, asking "is it smart to invest in AI startups in 2023?" means also asking "have I sought legal advice?" Because remember, a smart investor is an informed investor.

If you're intrigued by the potential of AI in the creative world after reading about investing in AI startups, we recommend checking out the workshop 'The Insane Potential of AI-Generated Art and Design' by Aunia Kahn. This workshop will provide you with a unique perspective on the intersection of artificial intelligence and creativity, helping you better understand the potential of AI in the art and design industries.