The new funding race over Generative AI
Have you heard about Cognitivescale, Modulate, Runway, Cohere, Stability, or still Napkin ? All those companies are part of the emerging Generative AI ecosystem whose most known advocate is OpenAI.
After the false start of the Metaverse, this new ecosystem is building large momentum, with VC/PE companies now allocating about USD 7 billion to date to an ecosystem worldwide of about 500 Generative AI startups.
Looking deeper at the data, we at Fortino have calculated that the ecosystem is worth about 65 billion to date, or 9 times the funding. This is close to three times more value/funding than the total startup scene and a premium to all AI start-ups to date.
Also, generative AI unicorns are still a very small fringe of less than 15 companies, or 1% of total unicorns, but those unicorns are already worth 1,5-2% of the total value of unicorns , or a significant value premium. Further, unicorn conversion after 5 years is already 2% of total generative AI startups, a conversion that is 5-8 times the conversion success of start ups in the last 15 years.
Recommended by LinkedIn
Those impressive figures explain the hype beyond the success of generative AI. But the next question is whether this is over-hyped and a bubble in the making. No one knows but a few things are worth highlighting:
- Ai early cycle had the same pace and continued to build up aggressively except recently. One may invoke fund dry up and valuation recast but “ traditional “ ai dry up may also be linked to more powerful generative ai deployment
- Ai productivity upside has often been on the range of 5-10 percent uplift- generative ai tends to be above that range creating a value potential that might justify great potential
- Generative ai might be less about automation than about major innovation (think drug discovery) and content personalisation for workers improving the case for lower end workers to be augmented by the technology. If this is true, generative ai may be more socially promising than pure automation tools and can justify its valuation potential
We are evidently only at the start of generative ai - time will tell how it evolves. However it is still a very small niche at this stage that warrants the birth of many other startups to come and build up the space
Founder & CEO of KYield. Pioneer in Artificial Intelligence, Data Physics and Knowledge Engineering.
1yNo question there was an initial frenzy in VC first part of the year. As is usually the case many of these valuations will wind up being insanely overvalued whereas others will prove to have been genius investing in hindsight. I don't have time to monitor as I once did when in VC but my sense is quite a few have nailed niches nicely, some will be taken out by the incumbent market leaders, and a few might be able to hang on as only GenAI specialists for a while. We view GenAI as a function within the KOS, and just recently announced adding the function to the menu of apps. The gold rush slowed me down -- I wanted to get a sense on direction of regulation and decision makers. Volatile markets notwithstanding, I'm unusually confident in our end-to-end systems approach to EAI. Decades of R&D and 15 years of prep hasn't hurt. In hindsight I'm glad I walked away from a large A round in SV planned for around 2012. It was much too premature for the technology, cost basis, or market.