Venture Capitalists Play Matchmaker, Hooking Up AI Startups With Clients

"Eager for AI bets to pay off, venture capitalists are playing matchmaker for their founders as corporations rush to adopt the latest AI tools.

Venture capitalists have long fostered relationships with corporate decision makers, including chief information officers and heads of technology. Those connections are especially valuable in the AI age since startups are chasing many of the same corporate customers. The right intro could pay huge dividends, venture investors and entrepreneurs say.

"Are [venture capitalists and CIOs] getting closer together? The answer is yes," said Tim Crawford, the CIO and strategic adviser of consulting firm Avoa. "That's absolutely out of necessity because the VCs need to have better clarity as to potential growth and the CIOs are needing to understand" where they are going to be able to bring innovation.

AI has been a bright spot in an otherwise struggling venture and startup ecosystem. While off the peak of 2021, venture funding for AI startups globally rose 152% to roughly $73 billion last year compared with 2017, according to analytics firm PitchBook Data. 

In 2021, AI startups raised $128 billion. High even by Silicon Valley standards, that amount of capital has ratcheted up competition among startups looking for customers.

Linda Lian is the co-founder and chief executive of AI business productivity startup Common Room. She said the executive connections of board member and investor Sarah Guo, founder and managing partner of venture firm Conviction, helped Common Room, founded in 2020, sign early customer deals.

Guo put in a good word this year with the CEO of a Fortune 100 technology company that was evaluating Common Room and competitors, Lian said. That helped Common Room win the deal, which was completed in a matter of weeks, lightning fast in the world of enterprise sales, Lian said.

"At the end of the day we need to win by our own merit, but that stamp definitely helps us start off on a firm grounding of legitimacy," Lian said.

The speed at which AI-related enterprise deals are getting done is making venture capitalists' connections more valuable, Lian said. Sales that previously would have taken a year are getting done in weeks and intros that help startups cut through the competition are key, she said.

"When things are moving that fast, that's where an investor calling an executive that they have partnered with for years, that they've earned the trust of, saying, 'Hey, I know you need this urgently, you should look at this.' That goes a long way for everyone right now," Lian said.

Guo said playing matchmaker isn't just about setting portfolio companies up with customers for their products or services. Both parties have much to gain from swapping information even if a deal never materializes. Startups can learn how to orient their technology while executives can see what possibilities are out there, Guo said. "If you know a buyer's problem, you can more easily play matchmaker," Guo said.

Guo said she holds dinners involving AI startups and potential enterprise buyers with rotating themes of different tech problems that need to be addressed.

CIOs, meanwhile, are relying more heavily on connections with venture capitalists. Sharon Mandell, the CIO of network tech company Juniper Networks, said before the frenzy over AI began in late 2022, she would connect with venture investors once or twice each quarter. Now, it is once a week.

"I definitely have been leaning on it more," Mandell said. "Things are changing so fast and there are so many different opinions on what's going to work and what's not going to work."

Mandell said she wants to keep abreast of emerging tech that can address problems her company is looking to solve. Investors, meanwhile, are eager to get their companies in front of buyers.

Companies could be looking to make improvements such as streamlining their IT cloud management system.

In November, Mandell said she was one of about a dozen CIOs hosted by venture firm Sequoia Capital at its Sand Hill Road office in Menlo Park, Calif. Sequoia partners introduced the group to a handful of its portfolio companies. Juniper is now entering into a paid proof-of-concept trial agreement with one of the AI startups that was at the Sequoia meeting, Mandell said.

"It's the mix of my network and that direct engagement I can get with the founder to understand how they're building things that's making us try it now," Mandell said.

Mark Fernandes, a managing partner at Sierra Ventures, has experience working with corporate buyers. For nearly 20 years Sierra Ventures has hosted an annual summit that brings together executives including CIOs, chief technology and chief data officers with entrepreneurs and investors to discuss emerging tech. Though deal pitching and matchmaking aren't the explicit purpose of the meetings, resulting business deals aren't uncommon, Fernandes said.

Tenry Fu, CEO and co-founder of AI-related software company Spectro Cloud, said deals, particularly with large Fortune 500 enterprises, that might typically take up to two years are being sealed in a matter of months. 

Last year at Sierra's office in San Mateo, Calif., Fernandes introduced Fu to a Fortune 50 consumer product manufacturing company. Fu did a roughly 20-minute speed pitch for the CIO and head of innovation. The two companies went on to close a commercial deal in the fourth quarter of last year.

"Especially for this size company, that's definitely considered very fast," Fu said. "AI is a very new space. Every CIO is looking for their AI strategy."" [1]

Why is everyone in such a hurry? As artificial intelligence opens up a huge new area of business, everyone is scrambling to get a bigger piece of it. To keep us, Eastern Europeans, from competing we are given toys: nationalists like Lithuanian Defense Minister Kasčiūnas, Chinese drones, German artillery shells, Zelenskiy's adventures in Ukraine, conscript problems, brigades, divisions and curfews. While we are wasting money, energy and time, others are occupying a new market.

1. EXCHANGE --- Venture Capitalists Play Matchmaker, Hooking Up AI Startups With Clients. Vartabedian, Marc.  Wall Street Journal, Eastern edition; New York, N.Y.. 11 May 2024: B.11.