GenAI Startups: Weighing the Hard Realities vs. Hype
With Google's unveiling Gemma last week, a SLM (Small Language Model), entrepreneurs will be now more inclined than ever to venture into AI startups.
Most followers of this blog are already familiar with Generative AI (GenAI), a subset of artificial intelligence (AI) renowned for its ability to produce novel content like text, images, or music, drawing insights from extensive datasets. It uses advanced machine learning (ML) models, especially deep learning networks like Generative Adversarial Networks (GANs) and transformers, to generate output similar to their training data.
GenAI is hot, but it's crucial for entrepreneurs to assess the market and other considerations before jumping in. When thinking about starting a GenAI-based business, they need to take into account several key factors:
The Upsides:
Rapid growth: GenAI is booming, with the potential to revolutionize industries.
Early mover advantage: Be at the forefront of a game-changing technology.
Innovation in the AI tools market: GenAI could become the next Google, driving innovation.
Unlocking value: Create solutions for businesses and consumers in diverse fields.
Investor interest: We may be in an AI bubble. GenAI is attracting significant funding. Be careful. There are many lemmings scurrying headfirst toward a cliff.
The Downsides:
Oligopoly: Big players like OpenAI, Microsoft, Google, Anthropic, and others who control critical models, making it challenging for newcomers. Open Source contributors to small and large LLMs are also a major market factor.
Unsustainable differentiation leads to "inadequate defensibility" of generative models over time: Models quickly become obsolete and are easily copied.
Regulation & ethics: Uncertain regulations and ethical concerns around data use.
Unproven business models: Revenue potential is unclear, and hype may exceed reality.
High costs: Compute cost, model training, R&D, compliance, talent, AI infrastructure, sales, and marketing are expensive.
Blindly following investors: Following lemmings in a bubble carries its own risks and dangers.
The Verdict:
GenAI has exciting potential for startups, but proceed with caution. Consider the downsides, carefully evaluate your team and technology, and develop a realistic business plan. Remember, long-term success depends on more than just the "hotness" of the space.