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🌈 Abstract

The article discusses the current hype around generative AI and its impact on venture capital funding. It examines why generative AI is not attracting the majority of venture capital despite the widespread belief that it is a transformative technology.

🙋 Q&A

[01] The Hype Around Generative AI

1. What is the current perception of generative AI in the startup and venture capital space?

• The article states that generative AI is currently the "event horizon du jour" and that its proponents, including founders and investors, promise a total transformation of life and economics.
• However, the article suggests that this perception may not match the reality of venture capital funding, with generative AI companies only accounting for about 20% of all startup funding rounds of Series B and earlier.

2. Why is generative AI not attracting the majority of venture capital, even if it is seen as a transformative technology?

• The article provides several reasons:
  • Venture funds are guided by their founding thesis statements, which determine the purpose and direction of where their money can be invested. An oncology fund, for example, would not suddenly pivot to an unrelated application of large language models (LLMs).
  • Diversification is a key principle in venture capital, and going all-in on one technology violates this.
  • Some investors may be wary of investing in generative AI startups due to the large amounts of money being poured into the technology by tech giants like Microsoft, making it less likely for startups to succeed.
  • There is a possibility that the hype around generative AI may be overblown, and that the technology has not advanced as dramatically as expected in the 18 months since ChatGPT's release.

[02] The Broader Perspective on Technology Hype

1. What broader lesson does the article suggest we should take from the generative AI hype?

• The article suggests that the fact that VCs are more tepid about investing in generative AI startups than the zeitgeist might suggest is instructive for how we think about all technology or any fad.
• The article quotes a tech critic who says "the right thing to do here is, at the very least, operate with much more suspicion" when it comes to technology hype.