You cannot escape conversations about AI no matter how far or fast you run. Hyperbole abounds around what current AI tech will be able to do (revolutionize every industry!) and what current AI tech will be able to do (take over the world!). Closer to the ground, TechCrunch+ is working to understand where startups might find footholds in the market by levering large language models (LLMs), a recent and impactful new method of creating artificially intelligent software.
How AI will play in Startup Land is not a new topic of conversation. A few years back, one venture firm asked how AI-focused startups would monetize and whether they would suffer from impaired margins due to costs relating to running models on behalf of customers. That conversation died down, only to come raring back in recent quarters as it became clear that while LLM technology is quickly advancing, it’s hardly cheap to run in its present form.
But costs are only one area where we have unanswered questions. We are also incredibly curious about how startups should approach building tools for AI technologies, how defensible startup-focused AI work will prove, and how upstart tech companies should charge for AI-powered tooling.
With the amount of capital flowing to startups working with and building AI today, it’s critical that we understand the market as we best we can. So we asked a number of venture capitalists who are active in the AI investing space to walk us through what they are seeing in the market today.
What we learned from the investing side of the house was useful. Rick Grinnell, founder and managing partner at Glasswing Ventures, said that within the new AI tech stack, “most of the opportunity lies in the application layer,” where “the best applications will harness their in-house expertise to build specialized middle-layer tooling and blend them with the appropriate foundational models.” Startups, he added, can use speed to their advantage as they work to “innovate, iterate and deploy solutions” to customers.
Will that work prove defensible in the long run? Edward Tsai, a managing partner at Alumni Ventures, told us that he had a potentially “controversial opinion that VCs and startups may want to temporarily reduce their focus on defensibility and increase their focus on products that deliver compelling value and focusing on speed to market.” Presuming massive TAM, that could work!
Read on for answers to all our questions from:
- Rick Grinnell, founder and managing partner, Glasswing Ventures
- Lisa Calhoun, a founding managing partner, Valor VC
- Edward Tsai, a managing partner, Alumni Ventures
- Wei Lien Dang, a general partner, Unusual Ventures
- Rak Garg, principal, Bain Capital Ventures
- Sandeep Bakshi, head of Europe investments, Prosus Ventures