In 2023, funding for AI startups was primarily driven by corporate investments from companies like Microsoft and Amazon, rather than traditional venture capital investments. This shift towards core AI technologies and specific vertical applications, rather than general-purpose middleware, was noted by Pitchbook senior analyst Brendan Burke. The trend towards developing AI tools for business applications, such as generating sales or maintaining compliance, is seen as more reliable than creating novelty content like videos or photos.
Clay Bavor, co-founder of Sierra, believes that the focus on targeting specific customers and iterating based on feedback is driving AI startups towards B2B models. While technologies like ChatGPT can generate a variety of content, the demand for narrowly focused tools is increasing in the corporate world where companies use multiple technical systems, creating opportunities for smaller companies to sell their specialized tech.
Despite the potential of generative AI tools, such as ChatGPT, for business applications, there are challenges in terms of errors and meeting privacy, security, and regulatory standards. Companies like Sierra and Glean are investing heavily in establishing safeguards and parameters to ensure accuracy and compliance in their AI systems. The threat of larger AI companies introducing competing tools poses a risk to smaller AI startups, pushing some to explore alternative technologies or even develop their own AI solutions.
Overall, the focus for many AI startups is on serving specific business use cases, particularly in sales and marketing, to differentiate themselves in a competitive market.
