How to invest in booming tech markets like AI and cloud computing, according to an expert

As AI surges in popularity, investors are swooping in to the back data processing and cloud companies that will power the new technological revolution.

Georgie Turner , a partner at Australia and US-based venture capital firm Tidal Ventures , is one of those investors.

Tidal backs early-stage startups that have the potential to revolutionise industries, even if their prototype or concept is still in its infancy.

In this interview with LinkedIn News Australia, Turner explains the potential of AI and cloud computing, how to win her over in a pitch, and the emerging technologies she's watching closely as an investor.

Georgie, investment in AI and cloud startups is going gangbusters at the moment. What's it like being a VC in this space at the moment?

Luckily we’ve been playing in this space for a while with our investments in the likes of PredictHQ from our first fund and Search.io from our second. But with the recent buzz I have to keep checking in on all the recent apps being built to make sure we’re sizing up the AI opportunity appropriately. If someone could please build a GeorgieGPT to do my research, I’d personally fund that.

Is a bubble forming in the AI sector?

Like the rest of the world, I’ve been excitedly watching the number of AI-centric companies flooding the market. It’s undoubtedly a once-in-a-generation opportunity that every investor should take seriously. But I fear the hype will result in investors getting FOMO, straying from their core diligence processes, and overlooking some critical indicators they wouldn’t usually miss. The last thing a founder and an investor wants is a market full of overvalued assets. So as an investor, I’m cautiously optimistic about the time we find ourselves in. Every technology investment I look at should have a view of how AI can make their product substantially better and an eye on how they can build with an AI-first mentality. But what remains steadfast in the era of AI—founders still need to hustle to create game-changing products and compelling business models in markets with tailwinds.

What is your current focus as an investor, and why?

Recognising the profound impact of technology on human behaviour and its potential to spark transformative shifts within society and reshape value chains, we find ourselves amidst a technology cycle of global significance.

While 75% of computing remains on-premise, the rise of AI is driving a surge in worldwide investment in data centre processing capacity. Projections indicate that cloud spending will reach $592 billion by the end of 2023. In light of these developments, our investments align with the following three broad areas, reflecting our investment thesis:

1. Focal points: We seek out technologies and individuals capable of driving scalable optimisations, leading to the emergence of dominant platforms within specific sectors.
2. Cognitive cloud: Over the next decade, every application will adopt a data-centric approach (DaaS), with remarkable advancements in AI and machine learning that will fundamentally revolutionise how work is performed. We are excited to invest in this transformative domain.
3. Inflection aware: Going beyond general themes, we identify emerging inflections that significantly alter value chains within sectors. Our investments cluster around these inflections, which possess a greater likelihood of displacing existing practices. These include the future of consumption (commerce, sustainability, agtech), the future of enterprise (cybersecurity, observability and insights, productivity automation), and the future of service delivery (smart logistics, API infrastructure and development tools, fintech, regtech).

By framing our investments within these areas, we aim to maximise their impact and leverage the profound shifts in the technology landscape.

What emerging tech or industries excite you the most?

I am a firm believer in the transformative power of AI, which is why it forms a core part of our Cognitive Cloud thesis. To understand the potential implications of AI, our team has been debating and considering various aspects of its potential impact:

1. How does AI impact existing cloud applications and differentiation, where user experience is a key differentiator?
2. How does the commodification of content creation and semi-complex tasks by AI affect the value of underlying functions and companies?
3. What will be the new pricing model for AI, and how will it impact the pricing principles of cloud applications?
4. With increased automation, how will the lower cost of building a viable company, and what will the impact be of needing less capital?

We’re constantly thinking about the concept of primary data as a core element of our investment approach. Businesses that can produce and manage significant pools of primary data have an advantage in enabling their own applications and those of other organisations.

Primary data and its application have become the new differentiators in cloud, and developing contextual learning models for applications is proving to be very advantageous.

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How did you get into venture capital?

There isn’t a clear-cut path to venture capital. It seems to be one of those industries that people stumble upon for different reasons. In my case, I was part of an early team at Rackspace Technology Australia when we were selling the early version of cloud computing infrastructure to Australian corporates and startups at the same time as Amazon Web Services was launching in Australia. I got direct exposure to selling in a rapidly growing market, where competition was fierce for every deal. I had first-hand experience with the challenges of unlocking rapid growth and accelerating in a new market.

When I began searching for my next challenge, I knew I wanted to continue to drive rapid growth for Australian tech companies — but at scale. This is precisely what an operator-led venture capital firm offers: the opportunity to tackle significant growth problems alongside exceptional founders.

For me, the most thrilling aspect of my role is building global companies that have the potential to steal market share, outpace incumbents, and revolutionise entire industries. There’s nothing better than supporting visionary founders to bring their cutting-edge product vision to life and establish truly disruptive companies.

What do you look for in a founder?

In a nutshell, I’m looking for an inspirational leader who is in love with their problem space, a swift decision-maker, and someone who shows signs of rational optimism. Here are some of the key qualities I look for:

• Problem knowledge. They are genuinely passionate about the problem and have found an innovative way to address customer needs and capture the market. They offer unique and innovative insights based on their lived experience, which others often overlook. These insights stem from a deep understanding of the market, existing deficiencies, and potential opportunities.
• Customer obsession. They prioritise customer focus and adaptability in their solutions. They actively seek better ways to solve problems by empathising with customers and are open to transforming their initial ideas. They foster a product-led culture through customer interaction, research, engaging demos, and a roadmap driven by customer outcomes.
• Strong vision. They have a clear vision, focus on product-market fit, and attract early team members and investors. They possess a united founding team with complementary skills, an aligned vision, and a track record of success, inspiring others to join their journey.
• Great mindset. They possess energy, an action-oriented attitude, adaptability, and resourcefulness, making them determined, insightful, and gritty in scaling and persevering in startup ventures. They exhibit hi-low thinking, balancing short-term operations with long-term goals, with a clear vision and the ability to make fast decisions and adapt quickly based on daily metrics. They’re hardworking, humble, and have integrity, are open to feedback, thoughtful in their responses, and are attentive listeners.
• Product focus. They build a great product with a scalable market and a strong team, leveraging technical capability, product strategy, and growth expertise for a competitive advantage. Their disruptive and mission-critical product offers a clear value proposition, attracting new customers effortlessly in a market ripe for disruption.

What local or international startups are on your portfolio ‘Dream Team’, and why?

We live by the mantra that game-changing companies begin and end with the best product in the market. So I’d say that my dream would be to go back in time and work with the founding teams at Figma , Stripe , or Notion when they were at seed stage. To have been an investor working with their teams to build out their GTM and product strategy would have been a partnership unlike anything seen before.

What are your top listening or reading recommendations on investing?

I might be old school, but I’m all about listening tours. If I need to develop an in-depth understanding of something, I’ll try to go to the source and hear it from them. For example, I wanted to get a good hold on the state of the US market, so a few weeks back, I went on a San Francisco listening tour where I met with 15 US-based VC funds. I believe the insights I’ve gleaned from those 15 in-person, live conversations will provide more insight into the US market than any podcast or book could provide. In terms of newsletters, I’m signed up for Lenny’s newsletter for the latest in product and growth and Tomasz Tunguz for his commentary on startups, data, web3, and public markets.

What is your top advice to founders dealing with a downturn?

It’s no secret that a longer path to liquidity requires a strong commitment and determination, but great multi-generational companies are made in economic downturns. These types of market conditions call for a return to basics — centre yourself in your problem space and focus on doing more with less.

• Your founding team is there to support the vision you built together, take them on the capital efficiency journey with you and nurture their innovative solutions.
• Prioritise scalable, capital-efficient motions, including how product-led growth principles could help you scale sales.
• Maintain a strong line of communication with your customers and continue to solve their problems. They are your focus and in the early stages of building your company and could provide you with insights that make your roadmap write itself.

Want to learn more about cloud computing, AI and venture capital? Follow? Georgie Turner , partner at Tidal Ventures , on LinkedIn. You can also check out?previous Venture Chats interviews below.

???Tom Dawkins?from StartSomeGood —?read his interview here.

??? Trent Bagnall ?and? Steph Hinds ?from?Melt Ventures?— read their full interview?here.

?? Tom Humphrey ?from?Blackbird?—?read his interview?here.

?? Amanda Hjorring ?from?Square Peg?—?read her interview?here.

?? Dan Krasnostein ?from?Square Peg?—?read his interview?here.

?? Piruze Sabuncu ?from?Square Peg?—?read her interview?here.

?? Phil Morle ?from?Main Sequence?—?read his interview?here.

?? Raaj Rayat, CFA ?from?AirTree?—?read his interview?here.

?? Michael Tolo ?from?Blackbird?—?read his interview?here.

? Click here to subscribe?to the latest tech and startup news and analysis on LinkedIn.