Batch brew #27
Love-hate relationship between a start-up and Open AI
Hey, the autumn Caffeine Capitalist November edition here! 🍁
This is a packed AI package (not written by AI). And there is a lot of what is happening right now in the space.
Grab your novemberish pumpkin spice latte and let’s get right into it!
6 minutes and 8 seconds this time.
Dept. of Tiny Thoughts
While we are eagerly waiting on the State of The European Tech report by Atomico for the whole year 2023, there are is some interesting data from the H1 of 2023.
Change in VC capital invested from H1 2021 to H1 2023 - approximately 50% drop in all regions globally.
The drop in Czechia was even larger, 78% drop YoY in capital invested, based on the first three quarters of 2023 (report by Czechcrunch).
The amount of downrounds this year is 20% from all investment rounds, 3.6x higher than last year.
And only in the first quarter this year, there were more layoffs in tech companies globally than the whole last year combined.
Macro is still not getting better, yet this might be one of the best vintages to invest. Valuations are on sane pre-covid levels. Hard times and hard decision create durable founders and companies, and amount of new ideas and start-ups is still very high.
Read the recent interview with Andrej for Czechcrunch about the reasons of ongoing low VC activity, fundraising problems, increased European investment activity of ZAKA VC this year.
Dept. of Insights - Startups and their love-hate relationship with OpenAI
So OpenAI just hosted its first ever DevDay this Monday, where they served up a fresh batch of updates. But no folks, we don't just foam over the tech, we are more into the buzz that it creates in the startup community.
Flashback to the tidal wave of startups that mushroomed after ChatGPT landed. It was like a shot of espresso to the system. But let's be real, they weren't brewing any new tech – just different flavors of using OpenAI's existing technology through their API.
But as reddit users pointed out:
OpenAI has evolved beyond simply providing APIs for their models — they're now concocting their very own suite of services. These are the same types of services that once fueled a whole ecosystem of 'innovative' startups, many backed by significant venture capital investment. However, with OpenAI's new direction, these startup services are starting to seem a bit less groundbreaking.
Entire categories of startups got killed today by OpenAI at DevDay. It was total carnage for AI startup founders as @sama threw one new feature after the other at them.
Here are some startup categories that won’t exist starting tomorrow:
1. Closed Source LLMs: OpenAI launched… twitter.com/i/web/status/1…
— Abhishek Agarwal (e/acc) (@abhi_agarwal4)
Nov 6, 2023
With each new service OpenAI introduces, another segment of startups relying on the OpenAI API— finds themselves on the brink of obsolescence. This shift is setting a precedent that's likely to make raising venture capital a much more daunting task for AI startups.
Entrepreneurs have commonly faced skepticism when securing funding, challenged by the question of their defendability — "What if Google decides to step into our territory with the same feature?" This time, however, it's OpenAI that's stepping into the ring, potentially turning the tide for these startups and intensifying the competition.
The problem is not whether this OpenAI release will kill your AI startup or not.
The problem is that the market will think that way - until the next OpenAI drop.
So funding, hiring etc gets harder.
No matter what AI demo you show OpenAI can always beat it. No novelty.
— sphinx (@protosphinx)
Nov 7, 2023
Here’s a brief on some of the innovations unveiled at OpenAI's Dev Day:
GPT-4 Turbo: It’s smarter, cheaper, faster, better – armed with knowledge up to April 2023 and boasting the ability to churn out up to 300 pages of text on a single prompt (currently exclusive to developers).
Custom model creation: Tailor-made from your data, directly for the users (that’s you!) – and guess what? You don’t even need to be a coder (looks like no-code is taking the world by storm, once again).
GPT Store: A marketplace where users can hang up their model creations for others to vote on, with the potential to earn some cash if your GPT creation becomes a hit among the crowd.
For those who want to deep dive, you can read all about it here.
The AI industry is undergoing significant transformations. The intense competition among startups attempting to piggyback on OpenAI with simple overlay features is a natural part of the ecosystem's evolution. If you’re steering a startup that might be in the crosshairs of such changes, now's the time to strategize on your defensibility against these industry shifts.
Dept. of Twitter Thread Research (we can’t get our head around the generic “X”):
1/ Groooook. LLM here, LLM there. But this time a new one from X.com, with a humorous twist and real time data from Twitter. Well, that’s some uniqueness for sure.
This whole saga of Twitter acquisition is just getting more interesting. Really interested where will this end. And when will we see the X.com fintech super-app finally?
Grok is an AI modeled after the Hitchhiker’s Guide to the Galaxy, so intended to answer almost anything and, far harder, even suggest what questions to ask!
Grok is designed to answer questions with a bit of wit and has a rebellious streak, so please don’t use… twitter.com/i/web/status/1…
— xAI (@xai)
Nov 5, 2023
2/ Another AI news! European based Ai company Aleph Alpha raised an astonishing 500m Eur Series B round. That’s not the valuation, it’s the investment size.
The German AI startup hopes to compete with large language model (LLM) competitors in the United States and China.
— Sifted (@Siftedeu)
Nov 6, 2023
Dept. of Visual Research:
There are people who are friendly and polite to ChatGPT. Adding “please” to a prompt and “thank you” at the end. And were are part of this group.
It’s really funny if you think about it
How about you? 😄
News from our portfolios & where to shake hands:
Who is coming to Slush in Helsinki end of this month? Andrej will be there so let’s meet.
Slavo is back from his business trip to Austin Texas, still jet-lagged but an overview of the ecosystem will be part of the next caffeine capitalist!
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Enjoy your coffee fresh, allocate capital, repeat! See you in 2 weeks 👋
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