In Search Of AI Potential

Key Concepts

Seed investing, AI-native companies, AI-adjacent companies, Ideal Customer Profile (ICP), Product Marketing, Series A expectations, Operator vs. Finance background, Customer Acquisition, Talent Acquisition, Horizontal vs. Vertical Focus.

Seed Investing Focus at Oncor

Oncor focuses on seed investing, writing the first institutional check into companies. They are particularly interested in AI and back founders with strong convictions about new customer segments or company models. The goal is to support founders building companies that will define the next decade, with AI as a common thread.

Redefinition of Seed Rounds

While seed rounds are generally getting larger (Q1 average over $3 million, up from $2.5 million last year), the "high tens of millions" rounds are not the norm. However, founders are raising more capital to meet the increased expectations of Series A investors.

AI Integration in Startups

AI is rapidly transitioning from a specific sector to a pervasive element across all startups. Oncor invests in both AI-native companies (e.g., Evo for legal contract review, GPT Zero for copy editing) and companies selling to AI companies (e.g., Tailscale, a networking solution used by Mistral and Perplexity). The key is that companies are cognizant of the changing market and integrating AI into their product, operations, or customer base.

Operator vs. Finance Background: Value Proposition

The speaker leverages their operating experience (product, product marketing, international expansion) to assist founders. They are particularly drawn to technically strong founders building AI-enabled applications for engineering, product, and design teams who may lack product marketing or sales expertise. The speaker helps these founders define their ideal customer, develop outreach strategies, and acquire their first customers.

Founder Challenges and How to Address Them

Capital is becoming commoditized, so founders need more than just funding. The two main areas where founders struggle at the seed stage are:

1. Defining the Ideal Customer Profile (ICP): Seed stage companies can compete with larger horizontal players by focusing on a specific customer segment and owning their workflow end-to-end. Oncor spends significant time helping founders refine their ICP.
   • Example: Instead of trying to be a general AI solution for everyone, focus on a specific niche like AI for legal contract review.
2. Talent Acquisition: Identifying and recruiting the right talent to achieve milestones and reach target customers is crucial. Oncor assists founders in this area.

Conclusion

The key takeaways are that seed investing is evolving with larger rounds and higher Series A expectations. AI is becoming ubiquitous, and investors are looking for founders who understand how to integrate it into their businesses. Beyond capital, founders need help with defining their ideal customer and acquiring the right talent. Investors with operating experience can provide significant value in these areas.