Investors' secrets for spotting and luring winners from the crowd of artificial intelligence startups

Felicis, a venture capital firm based in the San Francisco Bay Area, is known for its global investments. Its founder, Aydin Senkut, who spent a few years at Google as a product manager, was born in Turkey and often speaks of the effort he sees in founders around the world.

Felicis is also renowned for its excellent track record, with early bets on successful companies such as Notion, Canva, Adyen, Cruise, Flexport and Shopify, to name but a few. However, the company is not resting on its laurels. On the contrary, Senkut and his team often attend industry events that founders flock to, and last week they participated as partners in an event organized by StrictlyVC. Fortunately, they're the best partners to have, given that Senkut and partner Viviana Faga have lots of interesting insights to share about the AI companies they meet and sometimes compete with to bring into their portfolio.

We caught up with both entrepreneurs for a quick chat. Here are some excerpts from that conversation:

Every day we hear of AI research teams breaking away from Google or other large companies. How do you compete with the many investment funds seeking their attention?

Senkut: It's funny, I was at Google when there were only 30 people, now there are about 200,000. A lot of these people are like family to us, we know them. So that's a huge advantage... We also have a thesis-driven approach, so we try to do a good job of communicating that certain areas are promising and that we have confidence in them. But you don't need to invest in every AI company to succeed. You just have to invest in the right ones. I'm really happy to see so much activity and that people working in AI are once again interested in the start-up ecosystem. I hope you budding founders will find success in one way or another. It brings a certain positivity to our ecosystem.

Obviously, not everyone is cut out to be a founder. How do you know who has what it takes? Social proof?

Senkut: I hope we don't make our decisions based on social evidence alone. There are many AI researchers, but some of them have the highest number of citations. Then there are researchers working on much broader and more important research than others. When we were working with Runway, they co-wrote the Stable Diffusion deep learning model and were part of a group of about 20 people in this field.

Senkut: Building a business isn't easy, so the market you choose is very important. One of the brutal laws I've learned since leaving Google is that you really have to choose your domain, because if you go up against established players who have incredible distribution, you can create an even 10 times better product, but it's much easier for that company with 100 million users to offer AI functionality and charge 1 $ a month than it is for a new company to create a brilliant product. This is where you really have to make a decision in terms of how critical this field is and its real chance of standing out. That's why there are far fewer companies that can stand out from the crowd.

Viviana, you mentioned go-to-market strategies. Are they very different for today's AI companies compared to "traditional" companies?

Viviana Faga: It's quite different, going to market in the AI era compared to what it was over the last 10 to 20 years with SaaS. Two things we talk about a lot are iteration speed. It used to be that you could launch a web page and add a few features over the course of a few months, and that was enough. Now, AI companies launch new features every day, and they're always the most powerful features. We also talk a lot about community. Companies are now launching on Discord, which is an effective marketing channel. So yes, it's quite different, and I find it really exciting.

You have a background in marketing, and I've heard you say that a good marketing strategy can change a company's trajectory. Out of curiosity, what do you think of two very different AI device launches that recently caught everyone's attention: the Humane AI Pin, which the company teased for months before presenting to a small group of journalists, and the Rabbit R1 device, which was launched without fanfare in a casino conference room at CES.

Viviana Faga: I saw the Humane launch and would love to buy one... You have to do something that suits you. For Humane, it made sense to create a low-key buzz and build anticipation. It depends on the market and the buyer the founder is addressing. But the best products don't automatically win. It's very easy to copy. So companies that look different, act different and communicate differently with their users are the ones that will stand out and win.

Senkut: Many great products are inspired by science fiction. The launch of Humane is one example. Will we have something that's ubiquitous, very easy to use and always there? The scary thing about marketing is that sometimes you can do everything right, but it can still take a while for the product to take off. But being original, being different, really counts. Being first doesn't win, but having the most differentiation does make a difference, and marketing amplifies that position.