How the generative AI boom could deliver a wave of successful businesses - VentureBeat

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How the generative AI boom could deliver a wave of successful businesses - VentureBeat

May 27, 2023 8:20 AM Join top executives in San Francisco on July 11-12, to hear how leaders are integrating and optimizing AI investments for success. Learn More Generative AI (Gen AI) is the buzzword of the year, gripping the global tech ecosystem. Leading VC Sequoia declared that gen AI could “generate trillions of dollars of economic value,” and thousands of businesses, from Microsoft to Fiat, have raced to integrate the technology as a way to speed up productivity and deliver more value for customers. Any nascent sector like generative AI, as was the case with Web3, also brings with it plenty of predictions about just how big it can/will become. The global AI market is currently worth $136.6 billion, with some estimating that it will grow by 40% over the next eight years. Even an overall slowdown in VC dealmaking has made an exception for Gen AI, with AI-assisted startups making up over half of VC investments in the last year. However, although generative AI tools are attracting headlines and frugal VCs’ money, and while some of the first movers have developed nifty AI tools that respond to critical pain points, how many of these will go on to become long-term businesses? Most that have monetized have stumbled into becoming businesses rather than as part of any long-term strategy, so what will they do if/when they need to scale to meet demand? There’s a lot that Gen AI startups still have to do to take this captivating technology and actually turn it into a sustainable business. In this article, I’ll explain where generative AI startups can start if they want to turn this short-term hype into long-term growth so they don’t miss a potentially huge market opportunity.  Event Transform 2023 Join us in San Francisco on July 11-12, where top executives will share how they have integrated and optimized AI investments for success and avoided common pitfalls. Register Now Hype ≠ Success  There are many hurdles standing between Gen AI startups and long-term profitability. First, it’s difficult to take a new technology and actually turn it into something profitable. While Gen AI tech is certainly impressive, it’s unclear how to monetize or integrate it into a profitable business model. So far, some of the most successful AI startups have used the tech to boost operational efficiency — like Observe.ai, which automates repeating processes that drive revenue and retention — or to help with language processing and content creation, like AI copywriting assistant Jasper.ai. But you can only have so many AI chatbots. Emerging Gen AI startups will have to carve out their own niches if they want to be successful. AI companies will also find it hard to maintain a competitive edge. Many AI startups are already struggling to differentiate themselves in an incredibly crowded market, and for every one entrepreneur with an innovative use case, there are ten more riding the wave with no destination in mind — presenting a “solution” without a clear idea of the problem it seeks to solve. There are already 130 Gen AI startups in Europe alone, and the chances of all of these companies reaching long-term profitability are slim.  Finally, AI is still a nascent technology with big questions about ethics, misinformation and national security concerns to be answered. AI companies looking to streamline workflows will have to address concerns about third-party software accessing potentially sensitive internal data before they can be widely adopted, while startups leveraging the speed and efficiency of Gen AI must come up with sufficient guardrails to address the dystopian concerns that these “machines” could come to replace up to a quarter of our jobs.  Riding the generative AI wave: How to turn short-term hype into long-term growth   To tackle the above hurdles, generative AI startups serious about building long-term businesses need to adopt some basic principles. It’s true the AI market is particularly frothy with investor cash at the moment, but that is an outlier in wider VC sentiment. Given the recent market downturn, investors are keener than ever to see examples of real, rather than projected, growth and are scrutinizing whether recipients of their money are built on scalable business foundations.  These are the key things Gen AI startups looking...