Venture capitalists take risks with their endeavors. Yes, a venture capitalist could reap significant windfall returns when funding something that turns out to be a hit. The early venture capitalist who put money into Hotmail, now Outlook, can attest to that.
Recent news and trends about how venture capitalists move their money could give insights into what could become the next colossal hit in the tech world.
However, decisions to move money away from artificial intelligence and into decentralized finance (DeFi) and Web3 surprise many.
Artificial intelligence moved from science-fiction films to the real world in various tech programs. Since the technology world advances rapidly, new innovations, products, and services remain in demand. Venture capitalists seed funding to compelling businesses with artificial intelligence concepts they think will succeed.
Changes in the market may leave some investors to think there are better options than seeding artificial intelligence. Decentralized finance intrigues many investors since DeFi reflects the arrival of financial technology that shares similarities to cryptocurrency. Perhaps DeFi endeavors will piggyback on the success of the digital currency.
Web3 refers to plans to launch an updated version of the internet, one based on blockchain technology.
Web3 intends to provide a decentralized version of the World Wide Web, making it a potentially highly innovative concept.
Blockchains are most commonly associated with cryptocurrency, but the Web3 concepts show there might be more use for the decentralized ledger system. Venture capitalists have taken note, and some are moving their money in Web3’s direction.
Taking Risks with New Innovations
Venture capitalists deserve credit for making numerous technological and business endeavors possible. Without venture capitalists, the world might not have the popular rideshare or food delivery services people appreciate. Of course, venture capital investments come with risks. Not every funding adventure reaps the rewards, as some lose money on the deals.
A segment of venture capital enthusiasts sees upsides in moving their funds toward DeFi and Web3. A 2021 report on third-quarter artificial intelligence financing shows less growth than in previous years and quarters. Higher-profile venture capital investors moved away from pure-play AI companies and put significant sums into Web3 and decentralized finance. Specifically, they moved six times the amount of early-stage money into these new concepts than they invested in machine learning and artificial intelligence.
Perhaps they see the future and don’t envision artificial intelligence or machine learning programs as strong investments. That’s not to say A.I. is going away, nor could DeFi and Web3 investments deliver any guarantees. However, top venture capitalists see the success potential of these new concepts. If they didn’t, they would not put their money at risk.
Blockchain and Crypto
The cryptocurrency and blockchain revolution continues to grow and impact other avenues of the technology world. Sometimes, new innovations retire previous ones, as seen in the social media and search engine world. Perhaps the artificial intelligence realm may move aside if Web3 and DeFi become runaway successes.
Then again, artificial intelligence and machine learning technologies could evolve in the new landscape. No one, including top venture capitalists, know how things will ultimately play out.