The Google-backed AI investors nobody took seriously in 2017 just raised $220 million

Core Insights - Gradient, an early-stage venture fund focused on AI companies, has closed its fifth fund at $220 million, reflecting the significant growth and interest in the AI sector since its inception in 2017 [3][6] - The number of companies fitting Gradient's investment thesis has surged from 100 per year to 1,500-2,000 annually post-ChatGPT, indicating a booming interest in AI startups [4] - Gradient has shifted its due diligence process to leverage engineering skills, emphasizing the importance of product functionality in potential investments [4] Fund Performance and Strategy - Gradient has backed notable companies such as Lambda, Oura, and Streamlit, with successful exits including CentML, Prepared, and Streamlit, which was acquired for approximately $700-$800 million [3] - The firm has taken on outside limited partners (LPs) for the first time, indicating a strategic shift to diversify funding sources and respond to increased institutional interest [6] - Gradient's management team expresses caution regarding large seed rounds exceeding $100 million, citing a lack of historical success for startups raising such amounts in seed funding [5] Market Context - The AI sector has evolved from a niche market to a mainstream focus, with widespread recognition of its potential for value creation, described as the largest platform shift in history by Gradient's team [7] - Initial skepticism about AI investments has transformed into a competitive landscape where nearly every firm is now AI-focused, highlighting the rapid change in market perception [2][3]