Generative AI startup losers

It feels like every day, I see a new generative AI startup or project being launched or announced on Twitter. AI startups have single handedly been the reason why VCs have deployed any capital in the last year. The hype is on.

It’s yet to be seen where the winners in the AI stack are going to win, but I have a hunch that the losers are going to fairly easy to spot. My perhaps not so hot take is that most projects that are effectively generative AI wrappers or lenses for consumers probably are shooting themselves in the foot by raising VC money.

Most of these projects raised money when revenue was skyrocket as people were experimenting. Getting an AI interior designer for your living room or gathering legal research are all great things that consumers want. But many of these are features that will be built by larger products that already exist.

Once these features are built into your every day applications such as Photoshop or Notion, many of these startups will unfortunately fail or have to be sold for less than the founders hoped. On the flip side, many of these startups can effectively be run bootstrapped and print money - it’s not a bad gig to just be a profitable small business!

Unfortunately, I think the allure and prestige of being a VC backed founder has been too much for most of these founders to pass up.