Venture Capital: Startup's Savior or Slayer?

Even amidst the anticipation of the Artificial Intelligence (AI) revolution, startups continue to founder. Over the past five years, more than 700 AI startups have gone out of business, with Olive AI in the healthcare sector being a prime example. Olive AI, once boasting a valuation of $4 billion, ceased operations in 2023 due to strategic missteps that failed to keep pace with its rapid growth, and reckless financial management. The author described this as a tragedy born from a "champagne and cocaine mentality." Behind these failures lies sharp criticism regarding the role of venture capitalists (VCs). Vinod Khosla of Khosla Ventures pointed out that most investors fail to add value and instead become a negative factor, emphasizing that an investor's qualification comes from actual business experience. Other experts also criticized that friction arises when VCs intervene unnecessarily or act like bosses, claiming to be mentors without providing actual value. In India, in particular, an immature VC ecosystem acting like 'super angels' was identified as a problem. Ashwin Raghuraman of Bharat Innovation Fund stated that ideal investor involvement is "0%", suggesting that a higher intervention rate indicates a company is not doing well. Interestingly, Sam Altman of OpenAI emphasized the importance of board advice, yet experienced the irony of being dismissed due to conflict with the board just two years prior. This demonstrates that conflicts over ideas and intervention can actually be counterproductive. However, simply excluding investors is not the solution. Experts emphasize that the true role of an investor is "not to give answers, but to ask the right questions." They argue that when entrepreneurs find answers themselves, they internalize them and develop the ability to execute. Accordingly, the industry is seeking new approaches: thoroughly evaluating not only technological feasibility but also the founding team's execution capability and market understanding during pre-investment due diligence, and focusing on building sustainable business models rather than hasty growth pressure after investment. Ultimately, the success of AI startups hinges on innovative technology, a healthy investment culture, and the establishment of mutually respectful partnerships. Past failures should serve as valuable lessons for the future.