VCs Analyze Challenges in the Longevity of Consumer AI Startups
In the wake of the generative AI boom that began three years ago, startups focused on artificial intelligence are primarily generating revenue from business clients rather than individual consumers. Despite the rapid adoption of general-purpose large language models (LLMs) like ChatGPT, specialized consumer applications in generative AI have struggled to find market traction.
Industry expert Chien likens certain consumer AI applications to early third-party flashlight apps, popular shortly after the iPhone’s launch in 2008, before being seamlessly integrated into iOS. He emphasizes that just as the smartphone market underwent a period of stabilization before robust consumer applications emerged, AI platforms need similar maturation for their consumer products to thrive. “We’re on the verge of a transformation comparable to the mobile boom of 2009-2010,” Chien states, referencing the era that birthed major consumer services like Uber and Airbnb.
Chien notes signs of this stabilization may be visible with advancements like Google’s Gemini reaching parity with ChatGPT. Elizabeth Weil, founder of Scribble Ventures, supports Chien’s observations, characterizing the current landscape of consumer AI applications as an “awkward teenage middle ground.”
What factors will catalyze the growth of consumer AI startups? Experts speculate that innovation may hinge on the development of devices beyond the traditional smartphone. Chien points out that a device used frequently yet limited in its capacity to perceive the user’s environment will likely not unlock the full potential of AI. “An ambient device could change the way we utilize AI,” he asserts.
Both experts argue that smartphones are inherently constraining for developing cutting-edge consumer AI applications. “I don’t envision that we will continue building solely for this in five years,” Weil says, gesturing to her iPhone.
In pursuit of a more intuitive personal device, industry leaders, including former Apple design chief Jonny Ive and OpenAI, are rumored to be collaborating on a pocket-sized, “screenless” gadget. Meanwhile, Meta is experimenting with Ray-Ban smart glasses controlled by a wristband recognizing subtle gestures, alongside various startups attempting to create AI-enabled wearables like pins and rings, although with mixed results.
Interestingly, not all innovative AI consumer products will rely on new devices. Chien envisions options such as a personalized AI financial advisor tailored to individual needs, while Weil anticipates the emergence of “always-on” tutors that deliver specialized content through smartphones.
Both Weil and Chien express caution regarding the potential for several covert AI-enhanced social network startups. Chien defines these platforms as creating environments in which numerous AI bots engage with user content, suggesting that they may transform social networking into a solitary experience. “The essence of social networking lies in the connection to real people,” he adds.
