Sapphire Ventures plans to invest over $1B in enterprise AI startups

VC firm Sapphire Ventures says that it plans to invest more than $1 billion in AI-related enterprise startups, demonstrating the strong appetite among investors for cutting-edge AI tech.

Reuters reports that the $1 billion in capital will come from Sapphire’s existing funds, which have $10 billion under management and about $3 billion waiting to the deployed. The majority will be in the form of direct investments in AI startups, while some will go to early-stage AI-focused venture funds through Sapphire’s limited partner fund, Sapphire Partners.

Sapphire co-founder and CEO Nino Marakovic says that Sapphire will focus primarily on business-to-business software companies that “make AI easily accessible” by “leveraging data to better predict outcomes.” Beyond this, the firm will back AI and machine learning startups improving business incomes for specific verticals, like manufacturing and healthcare.

“AI represents a profound technology shift, and our $1 billion commitment reflects our conviction in the opportunity,” Marakovic said in a canned statement. “We believe companies are only beginning to see the benefits of AI and GenAI, specifically. Soon, we expect there to be a massive, AI-driven productivity boom that will benefit workers at every level and create value throughout the global economy. We’re eager to back the next wave of enterprise innovators driving this evolution.”

As a part of the $1 billion push, Sapphire also intends to create an “AI Community” as a part of its Sapphire Communities platform for portfolio company CEOs and executives. And it will continue to implement AI across its internal workflows and incorporate AI tools across job functions to “help drive efficiencies,” Marakovic said.

AI startups, supercharged by the hype around generative AI, continue to perform exceptionally well relative to the broader market — collectively raising $15.5 billion this year, according to PitchBook data. Deal pace has remained steady, and the median post-money valuation for AI firms is up 109.8% from last year.

Should the rosiest predictions come true, the investments could pay dividends. AI has the potential to contribute $15.7 trillion to the global economy by 2030, a recent PwC report found, while the generative AI market alone could add as much as $4.4 trillion to the economy annually, according to McKinsey. (That’s assuming that the job losses resulting from AI’s adoption don’t outpace the productivity gains, of course — which is far from a guaranteed thing.)

Austin, Texas-based Sapphire, whose AI investments include Clari, DataRobot, Moveworks and ThoughtSpot, isn’t the only firm betting substantial cash on AI ventures. Corporate arms are becoming increasingly leveraged in the sector, as well, chasing after the enormous potential windfall.

Salesforce Ventures, Salesforce’s VC division, plans to pour $500 million into startups developing generative AI technologies. Workday recently added $250 million to its existing VC fund specifically to back AI and machine learning startups. OpenAI, the company behind the viral chatbot ChatGPT, has raised a $175 million fund to invest in AI startups. Last month, Dropbox launched a $50 million AI-focused venture fund. And AWS a few weeks ago said that it aims to put $100 million into a program to fund generative AI initiatives.