Touring Capital Aims to End AI Pilot Failure Epidemic with $330M Fund

The AI Reality Check: How Touring Capital's $330 Million Fund Aims to Separate Hype from Substance In the world of venture capital, few phrases are as feared as "AI pilot failure." But for Samir Kumar, a seasoned investor and general partner at Touring Capital, it was more than just a statistic – it was a wake-up call. When a bombshell MIT study revealed that 95% of generative AI pilots were failing, Kumar knew he had to dig deeper. "It's not about the technology itself," Kumar explained in an interview with Fortune. "The issue is how we're evaluating these projects. We're trying to accomplish too much, too quickly, without understanding what we're really measuring." Kumar's words echoed a sentiment shared by many in the AI community: that the hype surrounding AI has outpaced its actual capabilities. But Touring Capital, founded by Kumar and two other seasoned investors – Nagraj Kashyap and Priya Saiprasad – is on a mission to change that. In August 2023, the trio launched their first fund with an impressive $330 million in backing from top-tier investors like SoftBank and M12. But what sets Touring Capital apart is its unique approach: instead of chasing the next big AI trend, they're focused on understanding the underlying limitations of current technology. "We're not trying to be the ones who say 'AI is going to change everything,'" Kashyap said in an interview with Fortune. "We want to be the ones who say 'AI can do this, but only if we do it right.'" So what does that mean in practice? For Touring Capital, it means taking a step back from the hype and focusing on the fundamentals. They're working closely with startups to develop more realistic evaluation metrics for AI projects – metrics that take into account the technology's limitations and potential biases. "It's not about being pessimistic or optimistic," Saiprasad said. "It's about being realistic. We need to understand what AI can do, and what it can't." As Touring Capital navigates this complex landscape, they're not alone. Other investors are beginning to take notice of the importance of evaluating AI projects more critically. "AI is a tool, not a silver bullet," said one prominent VC investor, who wished to remain anonymous. "We need to be careful not to overpromise and underdeliver." For Touring Capital, the $330 million fund is just the beginning. With their unique approach and commitment to understanding AI's limitations, they're poised to make a significant impact on the industry. As Kumar put it: "We want to be the ones who say 'AI can do this, but only if we do it right.' And then we'll actually go out there and do it." The Implications Touring Capital's approach has far-reaching implications for the AI industry. By focusing on realistic evaluation metrics, they're helping to separate hype from substance – a crucial step in ensuring that AI is developed responsibly. But this shift also raises important questions about the role of venture capital in driving innovation. As investors become more discerning and critical, will startups be forced to adapt their approaches? Or will Touring Capital's approach create a new standard for evaluating AI projects? One thing is certain: with Touring Capital at the helm, the conversation around AI is about to get a lot more nuanced. The Future of AI As we look to the future of AI, one thing is clear: the hype needs to be tempered with reality. With Touring Capital leading the charge, it's time for investors and startups alike to take a step back and reevaluate their approach. Will this new era of critical thinking lead to breakthroughs in AI development? Or will it slow down progress? Only time will tell. But one thing is certain: with Touring Capital at the forefront, we're about to embark on a fascinating journey – one that promises to separate hype from substance and bring us closer to the true potential of AI. About the Authors Allie Garfinkle is a senior finance reporter for Fortune, covering venture capital and startups. She authors Term Sheet, Fortune's weekday dealmaking newsletter. Samir Kumar is a general partner at Touring Capital and previously worked as a CVC veteran. Nagraj Kashyap is a co-founder of Touring Capital and has extensive experience in the AI industry. Priya Saiprasad is a co-founder of Touring Capital and has a background in machine learning. *Based on reporting by Fortune.*