The floodgates opened in February with the introduction of ChatGPT and now, there’s so much happening in AI that it’s virtually impossible to stay on top of it. With thousands of tech layoffs in the last 90 days, and the prospect of accessible AI in all its forms, the startup market is starting to rumble. VCs are literally waking up to the opportunities before them and the pent-up millions (billions?) are lining up.
Applications for AI technologies are virtually endless in retail, customer care, real estate, insurance, transportation, logistics, robotics, and more. Whether it’s a matter of saving time, money, manpower on repetitive tasks, or sorting seemingly impossible amounts of data, artificial intelligence uses the power of machine learning to transform work as we know it. Using generative AI has opened the Pandora’s box to opportunities we hadn’t even considered. My old AOL colleague and noted investor, Chamath Palihapitiya, reminded us about another invention that had important repercussions. Coke became successful thanks to refrigeration. “Coca-Cola made more money than the people who invented the refrigerator, he said, and that could happen here too. If AI/LLMs are the refrigeration,” he asked. “Who will be the next Coca-Cola?”
Well, VCs are all over that. Says Martine Paris in a recent Forbes column, “With tens of thousands of laid off software engineers with time to tinker, glistening empty buildings beckoning them to start something new, and billions of dollars in idle cash in need of investing, it’s no surprise that just weeks after viral AI companion ChatGPT made its jaw-dropping debut…, one of the smartest cities in the world would pick generative AI as the driver of its next economic boom.”
Adds Paris, entrepreneurs have been flooding VCs with generative AI pitches: “This quarter we’ve seen more ChatGPT companies than I have seen through the whole lifetime of our fund,” said Position Ventures general partner Jenny He.
According to Pitchbook, with about $298.5 billion of dry powder as of September 30, 2022, VCs were waiting for the right founders with the right ideas. Also according to Pitchbook, VCs have increased investment in Generative AI by 425% since 2020 to $2.1bn, and that was before the advent of ChatGPT et al.
A couple of the new players include: Lensa’s new “Magic Avatars” launched in late November; Jasper, a copywriting AI-text generation application, which raised a $125m Series A round led by Insight Partners. Stability.AI, maker of text-to-image generator, Stable Diffusion, received $100m of Series A funding led by Coatue Management, Lightspeed Venture Partners and O’Shaughnessy Ventures. And there are plenty more.
The opportunity has surely begun for startups leveraging AI.