Paul Graham sold Viaweb to Yahoo in 1998, and he invested in AI start-ups. Now the billionaire says AI is far less expensive and far more valuable to almost every business or industry. (Source: Flickr/Mathieu Thouvenin)

Y  Combinator Founder Asserts Companies Spend Fewer Investment Dollars for More AI Now

As the old saying goes, “money makes the world go round,” and it makes the world of AI continue to grow. Also, it’s a lot less expensive these days to integrate AI systems than it was just 2 or 3 years ago.

Dan Primack has written a piece for that explains the current state of investments around AI start-ups in general. And the news continues to be good, according to Primack.

And while some of the older and far larger tech companies seem to be having money issues of some sort, analysts say there is still plenty of capital available for start-ups.

Paul Graham is an English-born American computer scientist, essayist, entrepreneur, venture capitalist, and author. He is best known for his work on the programming language Lisp, his former startup Viaweb and for co-founding the influential startup accelerator and seed capital firm Y Combinator. Mr. Gramham is clearly still excited about AI and the path forward for smaller companies to add AI to their operations.

What To Know:

It’s much cheaper to launch a startup in 2022 than it was in 2012 or 2002, thanks to secular tech trends like cloud computing. Yet typical startups have raised much more venture capital, beyond what can be explained away by delaying IPOs.

Graham believes, per an email to Axios, that “a lot of the reason startups have taken so much money lately is simply because so much is available … I don’t think it has to be as expensive as it has been.” In a tweet, Graham pointed out that Instagram only had 13 employees when it was bought by Facebook for $1 billion.    That worked out to almost $77 million per employee.

In more news from Graham, he is excited about an  AI-driven engineering breakthrough.

The Y Combinator co-founder last week tweeted that automation is enabling founders to grow successful companies with fewer people, adding that “in the limit case you’re left with just the founders.”

This came in the wake of OpenAI, led by Graham protégé Sam Altman, releasing a generative AI tool that eventually could enable engineers to do more in less time.

A Big Question

Primack asserted that the venture capital market doesn’t need to invest as much money in tech startups, and their numbers keep growing.

“Top venture capitalists contacted by Axios unanimously insist that AI won’t shrink startup capital needs (and, consequently, their industry). Some of this might have been delusional self-defense, but it was pretty persuasive.”

One big argument revolves around how, as startups scale, they require much more than just software developers. Sales, support, etc. Instagram, for instance, wasn’t generating income when Facebook bought it, but Facebook had the resources to make the purchase worthwhile.

“As AI pushes the cost of software down, the surrounding demand will increase.”

The results that AI is showing are nothing short of incredible. With nearly every industry finding a place for AI in their operations, it is easy to see more companies making the decision to develop and/or finance compatible AI for their future growth.