AI is not just another wave of innovation — it is the defining force reshaping global industries.
In 2024, AI startups attracted nearly one-third of all global venture funding, making it the most dominant investment theme of the year. This surge was driven largely by massive rounds for companies developing foundational large language models (LLMs). But these investments come along with high risks as the race for the best LLM requires billions of dollars and is still open.
From an investor perspective it is much more attractive to look for the best applications built on the LLMs which solve real problems.
That is exactly where AI.FUND invests—at the application layer of AI. Since day one, our focus has been on Applied AI: startups that turn cutting-edge AI technologies into tangible, high-impact solutions for business and society.
What Is Applied AI?
Applied AI sits at the top of the AI technology stack. It’s where artificial intelligence moves out of research labs and into real-world use cases—driving measurable value for customers, organizations, and industries.
Rather than building LLMs or foundational architectures from scratch, Applied AI startups leverage existing models (open-source or proprietary) and deploy them into domain-specific tools, platforms, and processes. This is where innovation meets execution.
Examples include:
- AI assistants for doctors and legal professionals
- AI-powered logistics and supply chain optimization
- Robotic systems in industrial production
- Intelligent software copilots for developers and sales teams
It’s this practical layer—deeply embedded in real workflows—where competitive advantages are created and scaled.
Why AI.FUND invests in Applied AI
The conditions for Applied AI to scale and succeed have never been more favorable. In recent years, the technical barriers that once limited AI adoption have largely disappeared, and today we are at a unique inflection point for turning AI into real business value.
- Computing power is no longer the bottleneck: Cloud infrastructure and specialized hardware—ranging from GPUs and TPUs to emerging neuromorphic processors—have made high-performance AI broadly accessible, enabling startups and enterprises to build and deploy sophisticated models without massive capital investments.
- LLMs and foundation models are now available: Thanks to open-source and commercially accessible models, startups no longer need to train their own LLMs from scratch. They can instead build on top of proven architectures, accelerating development and reducing costs dramatically.
- Enterprise demand has surged: Across industries, organizations are actively seeking AI-driven productivity gains and automation. Consultants, lawyers, and doctors are already seeing efficiency improvements of over 30%, while programmers working with AI copilots are achieving performance increases of more than 150%.
At the same time, Europe is uniquely positioned to lead in this next wave of AI innovation. Companies like DeepL (translation), Mistral (open-source LLMs), UiPath (robotic process automation), and Lovable (no-code app development) have proven that global AI champions can emerge from Europe. While the U.S. and China continue to dominate in capital-intensive areas like chip production, data centers, and foundational model development, Europe stands out in the domains where Applied AI creates the most value: deep domain expertise, access to proprietary industrial data, and strong regulatory alignment. This is where scalable, real-world impact is being built.
Our Investment Focus: The Four Pillars of Applied AI
AI.FUND’s investment strategy is built around four high-impact domains where AI is rapidly being adopted and scaled:
- Enterprise AI – AI that powers next-generation business operations
- Vertical AI – AI tailored to specific industries
- Industrial AI – AI embedded in Europe’s physical economy
- Advanced AI Tools & Platforms – The enablers of applied AI across sectors
These four themes are the result of multi-factor analysis and reflect where we see the strongest momentum for 2025 and beyond.
Enterprise AI – Powering Next-Generation Business Solutions
Enterprise AI is transforming how organizations operate. We invest in solutions that improve efficiency, enable automation, and increase data-driven decision-making across functions.
Adoption by function:
- Sales, Marketing & Customer Service – AI-driven sales automation, marketing optimization, and chatbot support (55–57% adoption rate)
- Finance – Fraud detection, algorithmic trading, portfolio management (40–70% adoption rate)
- Operations & Supply Chain – AI-driven forecasting, dynamic inventory, logistics optimization (~40% adoption rate)
- R&D & Product – Generative AI in design, patent analysis, trend prediction (31–59% adoption rate)
- IT & Security – Cybersecurity, threat detection, compliance automation
Why this matters:
Enterprise AI delivers scalable ROI, reduces costs, and is increasingly embedded across all industries—making it a highly attractive investment sector.
Vertical AI – Tailored AI for Specific Industries
Vertical AI startups specialize in solutions for high-value, regulated, or complex industries. These companies typically combine AI expertise with deep domain knowledge and data, making their offerings harder to replicate and faster to adopt.
Key Verticals:
- Healthcare – Diagnostic imaging, clinical workflow automation, personalized treatment
- Finance – AI-powered risk analysis, audit automation, fraud prevention
- Retail & eCommerce – Recommendation engines, dynamic pricing, personalization
Vertical AI is the largest segment among early-stage AI companies—more than 2.5x the size of the second-largest segment (horizontal platforms).
Why this matters:
These startups address real, industry-specific challenges with targeted solutions. That makes them defensible, relevant, and often highly profitable.
Industrial AI – Optimizing Europe’s Economic Backbone
Europe has global leadership in industrial sectors—automotive, energy, logistics, and advanced manufacturing. We invest in AI applications that digitize and automate these sectors.
Focus areas:
- Manufacturing – Predictive maintenance, material flow optimization, quality control
- Robotics & Automation – Intelligent robotic systems, autonomous production lines, edge AI
- Mobility & Logistics – Fleet optimization, autonomous logistics, AI-enabled traffic systems
Why this matters:
Industrial AI unlocks efficiency in capital-intensive environments. It also reinforces Europe’s strength in the real economy, turning legacy advantages into AI-enabled innovations.
Advanced AI Tools & Platforms – The Backbone of the AI Economy
We also invest in the enablers: platforms, tools, and foundational layers that support the application of AI across industries.
Key Segments:
- AI Agents & Autonomous Systems – Intelligent business process automation, virtual assistants
- AI Infrastructure & Platforms – Deployment, monitoring, and management of AI applications
- Generative AI & Advanced Models – Content generation, decision intelligence, deep learning
Why this Matters:
These technologies act as multipliers. They not only enable others to build applied AI solutions—they shape the pace and quality of adoption across the ecosystem.
How We Invest: What Startups We’re Looking For
We focus on early-stage, AI-native startups in Europe and Israel, typically at the Seed and Series A stages. We look for:
- Teams with both technical depth and market insight
- A strong understanding of specific customer pain points
- A scalable business model with a clear use of AI as a core value driver
Our role goes beyond capital. We bring AI know-how, operational experience, and a powerful network to help founders build, grow, and lead.
Why AI.FUND?
AI is no longer a future promise. It is already reshaping industries, and its application is where long-term value will be created—or lost.
We believe Applied AI is not a hype trend—it is a foundational shift, comparable to the rise of the internet or mobile computing. And it’s just beginning.
At AI.FUND, we are committed to finding and supporting the next generation of AI-first champions from Europe—those that will shape the next decade of technological progress and economic growth.
Applied AI is where innovation becomes impact. That’s where we invest.
