Investing in AI/ML startups: Prime Venture Partners’ investment strategy

  • Hannah
  • March 17, 2022
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“AI is an enabling technology for a startup,” said Gaurav Ranjan, VP Investment, Prime Venture Partners. “The metrics of whether a product has good product-market fit, customer engagement, product development or delivering value to the society does not change in an AI startup. However, because AI startups tend to leverage large amounts of data, one key thing to ensure is that the data they are gathering is unique and proprietary to the company in some sense since AI models themselves are going to be ubiquitous between companies.” 

Ranjan has over six years of experience across strategy, operations, business development, PnL management and category and vendor management. In his latest stints at two early-stage startups, he was part of the leadership team and has worked across functions to build and scale the businesses from scratch. He has an MBA from IIM Calcutta and a BE in computer science from BIT Mesra. 

The collaborative efforts with the domain experts, startup founders, peer VCs give Prime Venture Partners the edge, he said. “We wouldn’t be here without their encouragement and support,” said Ranjan.

Prime Venture Partners works with experts in the AI domain, including Srinivas Narayanan, ex-VP and head of applied research group at Facebook (now Meta) and Raj Mashruwala and Ashish Gupta, their Partner Emeritus. 

AI in investing 

Ranjan said most venture capital and investment firms are thesis-driven and do not make algorithmic bets. “While we use technology to gain traction, they are not AI-driven tech as we do not use AI models to surface trends,” he added. 

Fintech, global SaaS and digital India continue to be big focus areas for Prime Venture Partners. The team sees an acceleration in the formalisation and digitisation of India across payments/fintech/financial services, education, healthcare, urbanisation, B2B commerce, and logistics. “We continue to seek to invest in global SaaS,” said Ranjan. 

Ranjan said Prime Venture Partners are excited about the potential of business transformation using AI/ML, decentralised finance using crypto/blockchain, EVs, and infrastructure plays around gaming. “Investing in category-defining, technology and product companies will continue to be a core thesis at Prime,” said Ranjan.

“As the economy digitises, more and more data will be available to firms. It will be impossible to gain any information/insights from your data if you are not using AI. AI is pervasive across B2C, B2B, SaaS and all other aspects of the investment landscape,” he added.

Algorithms will be free, open-source or fairly affordable soon. As a result, organisations using data to drive business decisions will gain an edge. “Any company that is not a data company or does not use AI to inform its strategy going forward will not be competitive in the market,” said Ranjan.

Inside Prime Venture Partners 

Based in Bengaluru, Prime Venture Partners is an India-focused early-stage venture capital firm with an Indian advisory office led by Amit Somani, Shripati Acharya and Sanjay Swamy. The fund focuses on building disruptive product companies in India. 

(L-R) Amit Somani, Shripati Acharya and Sanjay Swamy, managing partners at Prime Venture Partners (formerly AngelPrime).

In addition, Prime’s extended team provides startups with expertise in marketing, public relations and communications, recruitment, finance, legal and human resources. Notable startups backed by Prime Venture Partners include Quizizz, Happay, Mygate, MFine, Dozee, NiYO, Sunstone Eduversity, KredX, Wheels Eye, etc. 

Since its inception, Prime Venture Partners has raised four funds and manages more than USD 250 million with investors, including the International Finance Corporation (IFC), part of the World Bank Group, a top-tier university endowment, several family offices and institutions, and numerous global technology entrepreneurs. The fourth fund (120 million) focuses on companies with an innovative approach to solving fundamental problems through technology. 

Differentiator

“At Prime, we believe that a successful startup doesn’t just require capital but also the right mentorship to catapult them into the next stage,” said Ranjan. 

“Our model of ‘deep-involvement’ means that each partner is just as equally involved in each company. We bring the collective experience to help brainstorm through the issues and challenges with the entrepreneurs. We make sure we have enough bandwidth and resources to work closely with each startup in the portfolio. We make sure we do not spread ourselves too thin by investing in too many startups per year,” he said.

“One thing we felt strongly about was that we want each startup that we invest in to be a ‘category defining’ company,” said Ranjan. 

Prime Venture Partners invests in category creators or those aiming to disrupt the incumbents with a 10x better offering. “Therefore, we expect the startups to be fearless and hustling,” said Ranjan. 

He said Prime Venture Partners is ready to back the startups on every bold bet they take. “We are the true partners of the startups through thick and thin we tell our portfolio founders that ‘bad news should take the elevator, good news can take the stairs.’ We wish to add value much beyond the money we bring. We have internal finance, legal and PR teams to help our portfolio companies in the early days when they don’t have the resources to manage them,” said Ranjan. 

Final thought

“One of the most common mistakes is force-fitting AI into solutions which otherwise do not need advanced AI,” said Ranjan. 

He said a startup needs to demonstrate it can collect proprietary data and extract value out of the data to improve efficiencies or drive monetisation. “Very often, data can be collected, but there is no path to monetise it. So we would encourage founders to think backwards regarding such things,” he added. 

Prime Venture Partners is currently looking for founders who are deeply passionate about solving problems and have unique customer insights. “If you have those, please do reach out to us!” said Ranjan. 

You can share your pitch with Prime Venture Partners here.