Where VCs See Opportunity in Regulated AI

AI is making software faster and cheaper to build. It is not making trust any easier to earn.

Simon Wu, Partner at Cathay Innovation, joins The Tech Trek to discuss how AI is changing investment opportunities across healthcare, fintech, insurtech, legal services, and other regulated industries.

The conversation looks at a major shift in software economics. Instead of simply selling seats, licenses, and tools, AI companies can increasingly perform more of the work and deliver the outcome a customer actually wants. That creates opportunities for new business models, especially in industries where customization and services historically made it difficult to scale.

Regulation adds another dimension. Compliance, accuracy, governance, and complex workflows make these markets harder to enter. But Simon argues that the same friction can create defensibility once a company earns the trust of its customers.

Key Takeaways

• Regulation can become a moat. AI may lower the cost of building software, but companies still have to earn the right to operate inside sensitive workflows.

• Software is moving closer to outcomes. Customers increasingly care about the result, not how many seats or licenses they purchased.

• AI changes the economics of customization. Companies may no longer have to choose as sharply between scalable software and labor intensive services.

• Human involvement still matters. In healthcare, wealth management, and legal services, AI can make professionals more efficient without requiring them to disappear from the workflow.

One Line That Stuck

“AI has dramatically lowered the cost of building software. It doesn't lower the cost of earning trust.”

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