The Strategic Imperative of Betting on the Dark Horses in Applied AI and Frontier Technologies

The Generative AI Revolution

Generative AI is undergoing rapid growth, reminiscent of the "iPhone moment of AI," but with a continued acceleration that defies typical technology adoption curves. From sophisticated language models to advanced image generation technologies, the potential for industry-wide transformation is immense. As this technology pushes the boundaries of what is possible, R3i is strategically positioned to harness its growth and drive innovation.

Empowering Global Founders

At R3i we have invested 2 years in quarterly Battles of AI where we boil the ocean around the Large Language Model companies and determine where to play, how to win, what to build, and what's the governance.

Strategy of course must always extend beyond technology alone - especially in some LLM ecosystems that are still somewhat nascent, where thousands of companies exist experimenting with the technology, but few exist with the technology embedded at the core and IP developed on top of - getting beyond the API wrapper.

The Economic Opportunity

Currently, the semiconductor sector captures about 90% of all Generative AI profits, with NVIDIA leading the charge. However, history shows us that initial semiconductor dominance eventually gives way to significant opportunities in infrastructure and applications. This anticipated shift in the value chain is where R3i sees substantial highly defensible potential.

Strategic Investment in Infrastructure

Our investment strategy is aligned with the need for high capacity, efficient and sustainable operations in data centres, and critical infrastructure : water and energy, which are the backbone of Applied AI capabilities.

With our coinvestment consortium, investing in disruptive solutions that enhance efficiency and sustainability, we support scalable growth in emerging AI technologies, addressing critical environmental concerns.

The Application Layer’s Potential

Though currently smaller in revenue scale, the application layer of Generative AI is set for explosive growth. As this technology matures, applications are expected to become the primary value drivers within the ecosystem. By investing early, we position ourselves at the forefront, ready to capitalize on and contribute to the next wave of AI-driven solutions.

Our Approach: Selective Investment and Supporting Innovation

• Selective Investment: We focus on companies developing groundbreaking applied AI applications and improving infrastructure efficiency.
• Supporting Innovation: We partner with startups pushing the limits of Applied AI, not only generative AI. From reducing energy consumption to leveraging AI in novel environmental applications.
• Building Ecosystems: Through our Planet43 programs we create synergies between innovators, investors, application developers, and infrastructure providers to foster a holistic growth environment.

Looking Ahead: A Market Rebalance

While today's profit distribution heavily favors the semiconductor layer, we anticipate a market maturation that will rebalance this distribution, mirroring the evolution seen in mobile and cloud computing through to the applications layer. R3i is committed to leading this transformation, ensuring our partners and stakeholders are ideally positioned to benefit from these shifts.

Chasing Dark Horses: A Calculated Strategy

Investing in 'dark horses'—emerging managers and companies in unconventional markets—is a deliberate strategy designed to yield asymmetric returns through geographic and diversity arbitrage. This approach is vital for forward-thinking Managers like R3I CAPITAL and our Family Office LPs and CVCs focused on high-growth technology segments.

Why Dark Horses?

R3i itself is a dark horse in the venture capital landscape, with a diverse team experienced in seeing opportunities that others overlook. Our focus on areas requiring radical innovation, such as smart cities and critical infrastructure, underscores our belief in the necessity of backing unconventional candidates.

• Diversity Arbitrage and Value Creation We harness the potential of diverse and underutilized talent pools by prioritizing investments in emerging markets and supporting women and minorities. This strategy is not about filling quotas but tapping into a wellspring of creativity that drives community-based innovation.
• Non-Dilutive Funding for Asymmetric Returns In the high-stakes environment of deeptech startups, conserving equity is crucial. R3i’s track record of securing over $1 billion in non-dilutive funding allows our companies to grow without prematurely diluting their control, offering lower risks and higher potential returns for our LPs.

The Rationale for LPs

For LPs looking to invest in the next big thing in tech, the appeal of dark horses in the applied AI race is compelling. By investing in these underdogs, we offer a unique blend of high-impact outcomes and robust returns, tapping into a broader innovation pipeline and enhanced problem-solving capabilities. R3i is not just investing; we are redefining the trajectory of technology investment. Our strategy of backing the underdogs and leveraging their potential to disrupt industries aligns with our vision of investing in a future where diversity, equity, and returns converge.

For LPs ready to move beyond conventional investment approaches, R3i and our Planet43 programs offer a gateway to a future rich with technological and venture capital transformation. R3i Ventures invites you to join us in pioneering the next generation of technological advancements, from quantum computing to personalized medicine, space traffic control systems, and beyond.

Together, we rise. Together, we accelerate impact.

Join PureTerra Ventures Striders Corporation Hatcher+ and R3I CAPITAL as we launch the Planet43 Hydro Program June 10, 2024. The time is now.