Lu Zhang, founder and managing partner of Silicon Valley-based venture capital firm Fusion Fund, spoke with Benzinga about growth in the startup space and artificial intelligence, as well as areas of the market she finds most attractive right now.
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Fusion Fund targets AI, data-driven and deep-tech startups with a specific focus on fintech AI, digital medicine and automation. Two areas of the market where Zhang sees growth opportunities within AI are in the health care and space.
Automation in health care is helping transform the way people live their day-to-day lives. During January’s JPMorgan Healthcare Conference, it was reported that 200 million users of ChatGPT submit health care-related questions each week, and 40 million ChatGPT users ask about health every single day.
Meanwhile, Microsoft recently launched Microsoft for Healthcare, which uses AI to improve patient engagement and enhance data security. Google is also actively investing in and developing AI health care tools.
“AI tech leaders are realizing the health care sector has some of the highest-quality data with the most diverse use cases. That’s why I am very passionate about health care AI. I feel like it’s doing the right thing in a smart way. It’s not only about creating financial returns, but also about improving our quality of life,” Zhang said.
On the topic of AI and space, Zhang noted that she remains “very bullish” on the sector.
“SpaceX is the foundation of the space industry,” Zhang said.
She believes the space industry is large enough to support multiple AI startups and that the sector will see a significant increase in space-related technology over the next two to three years.
The creation of Starlink has enabled the collection of significantly more space and satellite data through edge devices. At the same time, the space sector offers major opportunities for AI-powered robotics, a field that is expected to grow rapidly over the next decade, Zhang explained.
AI Adoption and The Software Space
When asked about her thoughts regarding the idea that software will become irrelevant as AI becomes more prevalent, Zhang said the market needs to think carefully about the future of the business model for software-as-a-service (SaaS).
“I think the discussion we need to have is what will the business model be in the future for software powered by AI agents. In the future, the business model will probably be different. This is definitely a big question mark for existing software companies as to whether they can make this transition themselves,” she said.
At the same time, Zhang believes the market overestimated short-term integration and underestimated the long-term impact on the business model.
Currently, AI is not advanced enough to replace software, and full market integration will likely take a couple of years, she said.
The market must also address concerns surrounding compliance and security measures for this new technology.
“Just think about all the security integration, all the edge cases, and the consequences of using AI agents. We really need to make sure that [compliance] is available outside of the consideration of the technology,” Zhang said.
Outlook
It’s yet another busy year for Fusion, Zhang explained. The venture capital firm plans to make seven to 10 investments in early-stage startups.
“This year, the market is very dynamic, and there are a lot of changes happening. We’re going to focus on deployment [of capital] and invest in new companies,” she said.
Fusion invested in 10 early-stage startups last year, including Medra, Reality Defender, Starpath, Memories.ai, and Zeroport, to name a few.
Last week, the firm announced its fourth early-stage venture capital fund, Fusion Fund IV, which will focus on addressing challenges and opportunities arising from the rapid digitalization across the health care, enterprise, and industrial technology sectors.
The fund currently has $190 million in committed capital. Fusion Fund currently has more than $500 million in total assets under management.
Photo: Image courtesy of Lu Zhang
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