TechFlow news — On September 19, according to Cointelegraph, Tom Schmidt, general partner at Dragonfly Capital, said in an interview at the Token2049 event in Singapore that despite a significant influx of talent into artificial intelligence (AI), current market conditions in AI are deterring venture investors. Schmidt pointed out that crypto and AI are now competing for talent. As an emerging technology, AI is more attractive to professionals. "If you ask a recent graduate or founder which field they'd like to build in, I think more would choose AI. This forms a key point of competition between the two industries," he explained.
However, the situation looks quite different for venture investors. Schmidt noted that the AI market appears "overhyped and overfunded," causing investors to gradually lose interest. "There's serious concern about the valuations of some AI companies, and uncertainty whether their revenues can meet expectations," he emphasized. Schmidt compared the current risk environment in AI to that of 2021, estimating risk levels at around 5%. "We're observing that many teams face challenges in growing revenue. This could ultimately lead to compression in valuation multiples," he said. In finance and investment, higher valuation multiples typically imply that growth contributes more significantly to a company's value.
When asked whether such market conditions could create opportunities for crypto startups seeking venture capital, Schmidt gave an affirmative answer. He explained that crypto offers another asset class for capital allocation within venture investing. However, Schmidt also advised crypto projects to carefully assess their funding needs. "Not every company requires venture capital support. Some can succeed entirely by building profitable bootstrapped business models—in fact, many companies taking this approach have performed well," he said. He added, "While many teams have solid ideas or business models, they may not fully align with the expected return profile of the venture capital market."
