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Investing In An AI Fund – What You Need To Know (From An IFA’s Perspective)
Have you got cash to invest and are looking to get a much wider spread of risk within your investment portfolio? You might have even considered investing in an AI fund.
But what level of risk is involved in these funds? Should you be investing in AI startups or bigger stocks? How do you make the right call?
In this blog, we’ll help you make sense of it all by sharing some insights into AI investing – from an independent financial advisor’s perspective.
But first, what are the benefits of investing in an AI fund?
Tapping into a pool of technical and commercial expertise
Simon: “Often, we find that investors who have successfully exited their businesses want to have more speculative investments. However, sometimes they don’t necessarily have either the expertise in that particular area or the time to give to a particular company. So, one of the benefits of having a pooled investment is that you’re keying into everyone else’s expertise and knowledge, and hopefully benefitting from that.”
In our recent blogs and podcasts, we’ve talked a lot about the work we do with our in-house specialist engineering team, The Startup Factory, to thoroughly vet each opportunity and ensure that investors get the most value for their money.
Every investor needs that pool of technical and commercial expertise to sort the wheat from the chaff, and have a clear picture of what represents good value, especially given the current tech landscape. With this, you’ll be able to work out whether the AI product itself is genuine and if the technical strategy is feasible with the budget they have on the ground.
Is investing in a fund for you?
If you’ve been following our recent projects, you’ll know that we recently revealed our fund for early-stage and growth AI investments. Most of the investors we’ve talked to are generally successful entrepreneurs who have exited (sometimes) multiple businesses, and are looking to inject their cash into profitable ventures.
While there’s a wide range of investment options to choose from (property, the stock market, pensions, etc), funds like an AI and early-stage growth fund are particularly attractive for successful entrepreneurs. These entrepreneurs have been there, grown and sold their companies for decent sums of money, and now want to give back to the community that has given them so much.
Essentially, investing in an AI fund allows you not only to reap the rewards of the risk you’ve taken, but also to be a part of these tech startups’ success stories. This means you’ll be breeding the next generation of AI winners that may well become a large part of someone else’s portfolio in the future.
As always, we are huge fans of experienced entrepreneurs helping emerging entrepreneurs grow their businesses and benefit from our badges and scars. It’s why we started EHE Ventures and why we continue to do what we do.
Investing in bigger stocks vs startups
When you invest in some of the bigger stocks, you’re investing at a much later stage where the businesses are typically more stable, and there’s less risk involved. On the other hand, with AI startups, the risk is higher, and as a result, the potential for reward, when compared with the bigger stocks, can be great as well.
Simon: “If you’re investing in a startup, there has to be an element of risk associated with it. Obviously, people don’t take risks just for the sake of it; they do so because they want to get returns at the end of the day.
I think the important thing is to look at the whole financial picture. You need to have someone who can step back and manage it properly, and see the risks and the potential returns. With AI investments, there will be some that don’t make it to the end, but I’m confident that Guy and the EHE team will find the real winners.”
When you pick the right fund with the right people behind it, these kinds of investments can be terrific and provide a lot of fun along the way. Remember: investing in AI startups isn’t solely about the profits; it’s equally about enjoying each stage of the journey and being a part of something meaningful.
In a nutshell
AI funds offer pooled expertise and knowledge for investors seeking speculative, high-value opportunities. However, you need to:
- Look at the whole financial picture
- Make sure you pick the right fund and the right people backing it (we’ve got a great blog on vetting AI opportunities here).
To get more insights on investing in AI funds, you can listen to my full conversation with Simon here.
If you’d also like to learn more about our new EIS-qualified fund for UK early-stage and growth AI investments, register your interest here.
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