Sierra Ventures is doubling down on artificial intelligence—but not just anywhere in the stack. The early-stage venture firm, currently investing from its $265 million 13th fund, is targeting AI startups that offer deep efficiency gains, rich datasets, and solutions to urgent, widespread business problems.
We spoke with longtime managing partner Tim Guleri, who shared the firm’s five-layer “AI layered cake” investment framework and explained how today’s best AI startups differ sharply from those of past tech cycles.
“The premium is no longer on the idea,” Guleri says. “It’s on the team—and how well they execute it.”
AI Is the New Innovation Engine
According to Guleri, while the cloud era was about driving down costs, AI is unlocking entirely new possibilities. With generative AI now capturing the attention of more than 16 million developers worldwide, it’s not just about retooling—it’s a complete industry reset.
“There’s a 10x to 100x unlock happening,” he says. “The art of the possible has been reborn.”
This shift also changes the stakes. With so many teams chasing the same problems, winning startups tend to have a unique viewpoint, a clever way of applying AI, and the ability to distribute through product-led growth or word of mouth.
Guleri believes that generative AI will touch nearly every sector of the $104 trillion global economy outside of agriculture. Just the infrastructure layer of AI could be worth $50 billion today—and he sees that growing dramatically in the years to come.
The AI Layered Cake: Sierra’s Five-Part Investment Framework
Sierra Ventures approaches AI investments through what Guleri calls the “layered cake” model:
- Infrastructure (Not investing): This is the hardware-heavy base—think GPUs, data centers, and model training labs. It demands high capital and deep technical skills, which Sierra chooses to avoid.
- Applied Infrastructure: Sierra is active here, backing startups like Cimulate AI, which helps e-commerce companies improve conversion rates using personalized search powered by AI.
- Horizontal Applications: These are AI tools that serve general business functions across industries. One portfolio company here is Eudia, which uses AI to reduce legal department costs in large enterprises.
- Vertical Applications: AI tools tailored to specific industries. Sierra’s bet on Weav.ai targets the insurance sector, automating underwriting to speed up decision-making and reduce costs.
- Novel Innovations: This top layer includes startups creating entirely new categories or business models with AI. One standout is Revalia Bio, a biomedical startup accelerating organ-based testing to generate valuable research data. This layer is high-risk but holds the greatest long-term promise.
Guleri says Sierra is investing with a forward-looking mindset, aiming for where the market will be in three to five years. IPO windows may still be closed, but that hasn’t slowed the firm down.
“We’re patiently building,” he says. “And when the liquidity returns, we’ll be ready.”
