Artificial intelligence is one of the hottest topics in the private market landscape. Early signs indicate that the conversation isn’t slowing down anytime soon. 

The Generative AI market will be worth up to $1.3 trillion by 2032, with an annual growth rate of about 42% over the next 10 years, according to Bloomberg. In other words: AI software’s blistering growth is likely to continue. 

It probably won’t take more than a few seconds to encounter a headline or opinion piece centered on AI when browsing your favorite news source or scrolling through your preferred social media app.  

But how do you know what’s most important? How can you apply this information to help grow your business? 

We explore these questions – and more – in our new report, “Boston Startups Put AI and Data to Work.” 

The report — brought to you by Fidelity, Glasswing Ventures, and the New England Venture Capital Association — centers on how AI and data are shaping vertical industries and enterprises. While it’s focused on the Boston market, the insights reflect general trends that founders and leaders of private companies should know. 

What to watch in AI: 3 key trends for founders 

Let’s dive into three major themes profiled in the report: 

We’re approaching a “second wave” of Generative AI. 

The next generation of Generative AI (GenAI) tools could be much more sophisticated, according to Rudina Seseri, founder and partner at Glasswing Ventures and author of a popular newsletter on AI & ML. 

Seseri says that the first wave of GenAI offerings focused mostly on personal productivity. These offerings lacked revenue upside or sustainable market differentiation.

The second wave of GenAI will be more targeted at solving fundamental business problems, such as customer targeting, regulatory compliance, and improved customer service, Seseri added. 

Vertical AI is on the rise. 

Part of this second wave could include an increase in “vertical AI.” 

Vertical solutions have already gained large traction in the world of software as a service (SaaS). An example of a vertical SaaS solution is Toast, a point-of-sale system specifically designed for the restaurant industry, rather than a broader use case. 

Brendan Burke, a senior research analyst at PitchBook, believes AI software will undergo a similar movement. 

AI investment, Burke says in the report, will shift away from natural-language interfaces and general-purpose tools such as content creation and video. New AI tools will require advanced back-end data infrastructure to create strategic software for vertical-specific problems. Burke tabs healthcare as one area particularly ripe for disruption. 

Tracking investment in AI companies is becoming more difficult. 

The definition of what it means to be an “AI company” might be changing.  

Previously, it was easy to track funding when it went directly to AI SaaS vendors, the report notes. Now, vertical companies may begin using VC investments to develop or customize data-driven AI applications 

Kristen Craft, VP, Business Partner Manager at Fidelity, summed this point up well: “AI isn’t the point of the company (being funded). It’s what supercharges the company.” 

AI funding has been its own category. However, with more vertical companies developing AI tools, Kraft says, it may become trickier to define what that means. 

Discover Fidelity’s Equity Management Solution 

If you’re looking for more insights on AI fundraising and the future of GenAI, download our free report.

Speaking of fundraising: what’s your strategy to keep your private company ready for the next step? 

The conversations around AI bubble up to a common theme: growing companies can leverage technology to accelerate growth and plan for their future. Fidelity’s equity management platform, Fidelity Private Shares, can help your company streamline your cap table and stay fundraising-ready.  

You’ve got enough news to stay on top of; let our software help automate the organization of your company’s crucial documents and data. Schedule a demo to streamline your fundraising, equity management, and more with Fidelity. 

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Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation. 

Fidelity provides cap table management and other administrative services to private companies and their equity compensation plans.