VCs discuss why many AI startups are still underpowered

Even three years after the start of the AI ​​boom, most AI startups are still making money by selling to businesses, not individual consumers.

While consumers have quickly adopted general-purpose LLMs like ChatGPT, consumer-specific GenAI programs have yet to catch on.

“Many of the early AI applications around video, audio, and graphics were very good,” said Chi-Hua Chien, co-founder and general manager. The opinion of the company Goodwater Capitalat TechCrunch’s StrictlyVC event in early December. “But then Sora and Nano Banana came out, and the Chinese opened their videos.

Chien compares some of these apps to the simple flashlight, which was once a popular third-party app after the iPhone launched in 2008 but was quickly integrated into iOS itself.

He added that, just as it took several years for the smartphone platform to mature before game-changing consumer apps came out, AI platforms need a similar “stabilization” period for AI-based consumer products to scale.

“I think we are close to matching the 2009-2010 season,” Chien said. That era was the birth of the great mobile shopping businesses like Uber and Airbnb.

We can see the same stability with Google’s Gemini reaching the technology with ChatGPT, said Chien.

Elizabeth Weil, founder and partner at Scribble Venturesagreed with Chien’s thoughts on the early days of GenAI, noting that current AI applications are still in a “troublesome youth era.

What will it take for consumer AI startups to grow? Maybe a new device beyond the current phone.

“It’s unlikely that a device that you carry 500 times a day but only sees 3% to 5% of what you see is going to be the one that’s going to be the one that’s going to be the one that’s going to be the one that’s going to be the one that uses the power of AI,” Chien said.

Weil acknowledged that the smartphone may be too limited to rethink consumer AI products because it’s not always around. “I don’t think we’ll be building this in five years,” he said, pointing to his iPhone as he presented it to the audience.

Developers and technology companies have been racing to create a new device that can replace mobile phones.

OpenAI and Apple’s former head of design, Jonny Ive, are working on what is said to be a “screenless,” a pocket device. The shaver is Ray-Ban smart sunglasses they are controlled by a right-handed cable that recognizes invisible hands. Meanwhile, several startups are trying, which is often frustratingdisplay a pin, pendant, or ring that uses AI differently than phones do.

However, not all AI features will depend on the new device. Chien suggested that such offerings could be an AI financial advisor tailored to the user’s needs. Likewise, Weil hopes that a regular, “always-on” teacher will be ubiquitous, with its personalized lessons delivered directly from a smartphone.

Although excited by the potential of AI, Weil and Chien expressed skepticism about the emergence of several, yet to be seen AI social network startups. Chien said the industry is building a network where thousands of AI bots interact with user data.

He said: “It keeps people from talking to just one person. The reason people enjoy social media is because they know there are real people on the other side.”