As differentiated as AI startups try to be, the market has undeniably become crowded.
Getty Images; Alyssa Powell/BI
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In today's big story, we're looking at our annual list of the most promising startups.
What's on deck:
But first, this one has some promise.
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Harlem Capital; Boldstart Ventures; Kimberly White/Getty Images for TechCrunch; Chelsea Jia Feng/BI
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Business Insider spoke to dozens of venture capitalists to compile its annual list of the most promising startups.
We identified 85 young companies that are on the rise based on recommendations from 50 top VCs. Investors highlighted their portfolio companies and startups they had no financial ties to.
Surprise! AI-focused startups made up a majority of the list. Leena Rao, who oversaw the list and leads BI's VCs and startups team, estimated about 80% of the startups included are focused on AI.
But there is some nuance amid the AI frenzy. Instead of large-language models or all-purpose AI tools, these startups focus on specific sectors. From coworking spaces to weather prediction to military defense, they want to leverage AI in a niche.
Outside of AI, some familiar faces remain. Healthcare and fintech are still a draw even as AI has overtaken the startup community.
iStock; BI
As differentiated as AI startups try to be, the market has undeniably become oversaturated.
That's par for the course in startup world. When investors are willing to throw a ton of cash at an idea, people try to replicate it.
Hype builds until there are too many startups and not enough market share. Then comes consolidation. A new trend emerges. Rinse and repeat.
But unlike previous trends — social-media apps of the late aughts or the 2010s' personal-finance tools — AI comes with a massive price tag. It's not cheap to run AI models. It's also not immediately clear how they can generate revenue.
Historically, the tech industry doesn't mind burning cash for the sake of growth and innovation, but times are different.
We're no longer in the zero interest rate phenomenon, and the biggest companies in the world are struggling to pitch investors on their AI investments being worth it.
Now, cracks are starting to show in the AI ecosystem despite being less than two years into the revolution.
That's not to say AI is overblown. The tech will have a massive impact on the world. But the industry will have to navigate some rough waters in the meantime.
It's tough to say who will make it out alive, but these startups have a better shot than most.
Getty Images; Chelsea Jia Feng/BI
Getty Images; Jenny Chang-Rodriguez/BI
Getty Images; Alyssa Powell/BI
The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, senior editor, in London. Annie Smith, associate producer, in London. Amanda Yen, fellow, in New York.