VCs Reflect on the Short-Lived Nature of Consumer AI Startups
Despite the generative AI boom, three years later, consumer AI startups still struggle to gain traction. While consumers embraced general-purpose LLMs like ChatGPT, specialized consumer GenAI applications have yet to capture the market.
Chi-Hua Chien, co-founder and managing partner at Goodwater Capital, highlighted the evolution of early AI applications in video, audio, and photo, which initially seemed promising. However, with the release of Sora and Nano Banana, and the open-sourcing of Chinese video models, many opportunities vanished, much like the flashlight app's integration into iOS after the iPhone's launch.
Chien suggests that AI platforms require a period of 'stabilization' similar to the smartphone era's early years, before game-changing consumer apps emerge. He compares the current AI landscape to the mobile era of 2009-2010, when mobile-first consumer businesses like Uber and Airbnb took off.
Elizabeth Weil, founder and partner at Scribble Ventures, agrees that consumer AI applications are in an 'awkward teenage middle ground.' She believes that a new device beyond the smartphone is needed to fully leverage AI's capabilities.
Startups and tech giants are developing innovative personal devices to replace smartphones. OpenAI and Apple's former design chief, Jony Ive, are creating a rumored 'screenless' pocket-sized device. Meta's smart glasses, controlled by a wristband, and AI-powered accessories like pins and rings are also being explored, though with mixed results.
However, not all AI consumer products require new devices. Chien envisions a personalized AI financial advisor as a potential offering. Weil predicts that a 'always-on' tutor, tailored to individual needs, will become ubiquitous, accessible through smartphones.
Despite the excitement, Chien and Weil express skepticism about AI-powered social network startups. Chien warns that these companies are building networks dominated by AI bots, which may not provide the human connection that social media users seek.
