The Funding: Top VCs reveal why they invested $85 million in AI-crypto startup Sentient

The funding round that caught my attention the most in the past two weeks was Sentient. The AI-crypto startup pulled off the biggest seed funding round in the crypto industry this year, raising an impressive $85 million. The round was co-led by three high-profile investors: Peter Thiel's Founders Fund, Pantera Capital and Framework Ventures, with additional participation from other notable backers.

As I reported at the time , Sentient raised this massive amount in just three months despite being in the very early stage of developing its platform. The specifics of the platform's functionality are still under wraps. So, what about Sentient has drawn investors to bet big on it?

I interviewed all three co-lead investors of Sentient and three of its participating investors. Each of them is most impressed by Sentient's four co-founders or core contributors: Polygon MATIC +0.71% 's Sandeep Nailwal, distinguished engineering professors Pramod Viswanath and Himanshu Tyagi, and AI venture development startup Sensys, founded by Kenzi Wang of Symbolic Capital. This team's background and capability played a big role in investors' decision to back Sentient.

"The main thing about Sentient really comes down to the quality of the team," Joey Krug, partner at Founders Fund, told me. "I've known both Sandeep and Pramod for years," he said, adding that they are really sharp in their respective technological fields.

Jack Platts, founder of  Hypersphere Ventures , also said he's known Nailwal and Wang for years and that he likes "investing in friends, especially ones who have a history of success." Keli Callaghan, partner at Arrington Capital, said, "The most impressive element of Sentient is the team behind it."

Besides the team, Sentient's investors are also impressed by its vision. The startup aims to develop a community-built open-source artificial general intelligence (AGI) platform. AGI is a type of AI designed to perform any intellectual task that a human can do and potentially surpass human abilities in many areas. Creating AGI is a major aim of big AI giants like OpenAI, Google DeepMind and Amazon-backed Anthropic. While current AI models like ChatGPT excel with specific tasks, they don't possess general intelligence capabilities akin to human cognition.

Sentient aims to directly compete with OpenAI-like organizations but differs in its approach to building open-source, monetizable AGI with community contributions. Sentient aims to empower developers to collaborate to build AI models, monetize their models and data and become key stakeholders in the open AGI economy. That's a challenging task, especially for a young startup competing with massive tech giants.

"What Sentient is trying to do is pretty difficult," acknowledged Krug. "When we wrote the first check, it was actually sort of unclear whether it was even possible," Krug said. But now he thinks Sentient has made decent progress, showing early indications that its platform is technically feasible.

Krug explained Sentient's vision by drawing an analogy to Ethereum ETH +1.05% , which is open source, but users have to pay to use it. He said that on Sentient, users would pay to use AI models, verified by a signed cryptographic message, to receive responses to their queries. This approach, he said, aims to solve the economic problem of open-source AI. Again, he acknowledged that it is not an easy job, but told me the likelihood that Sentient will solve that problem "to some degree is very high."

If AI development stays closed source, many crucial aspects of society will be vulnerable to the centralizing effects of censorship and rent-seeking, said Pantera Capital's managing partner Paul Veradittakit. Sentient's open, monetizable and loyal (OML) AI models would have "great potential to disrupt the AI development industry," according to Veradittakit.

Brandon Potts, partner at Framework Ventures, said Sentient's open and monetizable AI models "will supercharge the open-source community" as that would be in "stark contrast to the status quo of big tech incumbents, walled gardens, and data silos dictating the future of AI." Potts said the Sentient team is "the most capable team" working to tackle the economic problem of open-source AI.

Sentient plans to launch its testnet by the end of the current quarter. Will it turn its ambitious vision into reality or stumble under pressure? That remains to be seen. For now, its investors are highly bullish on the team's ability to deliver on its promises.

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