Luge Capital’s David Nault on making investment decisions through the AI hype cycle

Luge Capital David Nault
Nault: AI is the “latest shiny thing that a lot of people are running after."

Since the release of OpenAI’s large language model-based chatbot, ChatGPT, enthusiasm for all things artificial intelligence (AI), and specifically generative AI, have surged.

In the months since ChatGPT launched in November, the pace of conversations surrounding generative AI’s development, deployment, and regulation hasn’t faltered. Entrepreneurs are building more and more new applications of the technology, and investors are flocking to back them.

Nault said he’s seen startups accelerate by tenfold after incorporating AI in their processes.

So, how can venture capitalists take an informed approach while investing in technologies that are in the middle of a hype cycle?

BetaKit sat down with Luge Capital’s co-founder and general partner David Nault at Startupfest this year, where he spoke about his personal investment thesis and how Luge Capital’s portfolio companies are incorporating AI into their strategies.

AI is the “latest shiny thing that a lot of people are running after,” according to Nault. He said identifying the long-term asset is more important to him, however. “I try not to run after things that are very early or that have yet to be proven that there’s a great business model and a great business to be developed.”

Though its primary focus is investing in FinTech startups, Nault said Luge Capital has been working with its portfolio companies to explore the potential applications of generative AI within their own products.

Nault has seen success among startups that use AI to summarize reports and extract information from complex documents. “Now their acceleration is just tenfold. Now these technologies, instead of doing a lot of this development in-house, they’re able to just get it off the shelf very quickly,” he said.

Luge Capital was launched in 2018 with the primary specialization in companies that improve financial services for consumers, businesses, and financial institutions. It raised a total of $85 million for its first fund, initially closing $75 million in 2018, and the additional $10 million in 2019.

RELATED: Luge Capital closes $75 million to invest in financial services startups

Among the FinTech startups that Luge Capital has funded include insurtech ProNavigator, wealth-management service provider OneVest, and Flinks, which offers an API that allows financial institutions to pull financial data from over 250 million Canadian users.

Nault spoke more about AI as an “enabler” for businesses, and how the “bar has been raised” for closing funding rounds. Listen to his full interview here.

Featured image courtesy Startupfest.

Charlize Alcaraz

Charlize Alcaraz

Charlize Alcaraz is a staff writer for BetaKit.

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