Even three years after the generative AI boom began, most AI startups still make money selling to businesses, not individual consumers.
Although consumers have rapidly adopted general-purpose LLMs like ChatGPT, most specialized consumer GenAI applications have yet to resonate.
“A lot of the early AI applications around video, audio and photo were super cool,” Chi-Hua Chien, co-founder and managing partner of Goodwater Capital, said on stage at a TechCrunch StrictlyVC event in early December. “But then Sora and Nano Banana came out, and the Chinese opened up their video models. And so a lot of those opportunities disappeared.”
Chien compares some of these apps to Simple Flashlight, which was initially a popular third-party download after the iPhone launched in 2008, but was quickly integrated into iOS itself.
He argued that just as it took a few years for the smartphone platform to solidify before revolutionary consumer applications appeared, AI platforms need a similar period of “stabilization” for sustainable AI consumer products to thrive.
“I think we’re on the cusp of the mobile equivalent of the 2009-2010 era,” Chien said. This period was the birth of huge mobile consumer companies like Uber and Airbnb.
We might get a sense of this stabilization with Google’s Gemini reaching technology parity with ChatGPT, Chien said.
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Elizabeth Weil, founder and partner at Scribble Ventures, echoed Chien’s sentiment about GenAI’s early days, describing the current state of consumer AI applications as being in a “tough middle ground for teenagers.”
What will it take for consumer AI startups to scale? Perhaps a new device beyond the smartphone.
“A device that you pick up 500 times a day but only sees 3-5% of what you see is unlikely to be what ultimately introduces the use cases that take full advantage of AI’s capabilities,” Chien said.
Weil agrees that a smartphone can be too restrictive for reinventing consumer AI products, largely because it’s not ambient. “I don’t think we’re going to build this in five years,” she said, showing the audience her iPhone.
Startups and incumbent tech companies have been racing to create a new personal device that can supplant smartphones.
OpenAI and former Apple design chief Jonny Ive are working on what is rumored to be a “screenless” handheld device. Meta’s Ray-Ban smart glasses are controlled by a bracelet that detects subtle gestures. Meanwhile, a number of startups are trying, with often disappointing results, to introduce a pin, pendant or ring that uses AI in a way different from smartphones.
However, not all AI consumer products will depend on a new device. Chien suggested that one such offering could be an AI-powered personal financial advisor, tailored to the user’s specific needs. Likewise, Weil predicts that a personalized, “always-on” tutor will become ubiquitous, with their specialized tutoring delivered directly from a smartphone.
Although excited about the potential of AI, Weil and Chien expressed skepticism about the emergence of several still-stealthy AI-powered social media startups. Chien said these companies are building networks in which thousands of AI bots interact with user content.
“It turns social into a single-player game. I’m not sure it works,” he said. “The reason people love social media is to understand that there are real humans on the other side.”
