How five investors view generative AI
The rapid adoption and excitement for tools like ChatGPT and DALL-E has firmly put generative AI front and centre for investors.
Generative AI is a subset of artificial intelligence where a system creates original content based on large data training sets. While the technology has been gaining momentum for several years, it exploded into the mainstream last November thanks to OpenAI’s generative AI software ChatGPT.
The large language model chatbot has wowed entrepreneurs and investors alike, with many already using it to assist with daily tasks such as drafting marketing copy or writing code.
Since then Microsoft has broadened its partnership with OpenAI in a “multibillion-dollar investment” to give its search engine Bing a new lease of life using generative AI technology.
According to PitchBook data, venture capital investment in generative AI has increased by 425% since 2020, with global investment standing at $2.1bn in 2022.
But what do investors make of generative AI? Do they think it matches up to the hype? Five investors shared their view with UKTN.
‘We will see a bubble starting to form’
“Mobile, social, cloud and all other major shifts make way for new industries creating new forms of value. With generative AI, we’ve made it cheaper and simpler to use artificial intelligence and machine learning to build new businesses on top of this technology, as we did with the cloud. 2023 is ‘the year of AI’. Offering the masses access to this top-tier computing power as a utility will create thousands of new companies. But with all major shifts, we will see a bubble starting to form. Lots of inspiration leads to duplication as many will start to bring the same ideas to life.
“Due to the turbulence of web3, we see liquidity in the market from investors looking to deploy into ‘the next big thing’ and now they’ve been enticed by ChatGPT’s promise of a new world order, further adding fuel to the fire.”
– Andy Barrow, tech partner at Praetura Ventures.
‘People are afraid of it’
“Many are excited by generative AI. Equally, people are afraid of it. In the last decade, we’ve seen how the growth of the digital creator economy has disrupted industries where the power has long been centralised and contributed to solving standard of living disparities in developing economies. Generative AI is an extension of this trend.
“Technology’s roots are in creating efficiencies and improving productivity. Generative AI can unbundle the high technological barriers of creation and empower creators to build faster and with more quality. Generative AI is integral to how technology will generate the wave of value, and I’m excited by it.”
– Jeremy Luzinda, principal at Haatch.
‘Social and ethical questions’ remain
“Since we started mapping the generative AI landscape, it has become clear just how many different sectors and categories of business that gen-AI can impact and disrupt. I am particularly excited about the impact for creators who can now use the technology to translate their video content into any language whilst retaining the output of the original creator’s voice. This enables creators to be global from day one and reach significantly larger audiences.
“Of course, there are social and ethical questions that need to be answered as this technology scales – but anything that makes knowledge and information more accessible around the world feels like an important step forward.”
– Ollie Forsyth, head of community and generative AI report writer at Antler.
‘Valuations are outpacing the technology’
“Generative AI remains early in its commercial journey and, as excitement grows about its potential impact, there are signs that valuations are outpacing the technology, which risks making investment less attractive. For investors, there are two groups of opportunities – ‘platform creators’, who build the core models (such as OpenAI), and ‘problem solvers’, who develop those platforms to address specific market opportunities.
“Due to the costs of building core platforms, the greater opportunity for venture capital is in backing ‘problem solvers’ with clear use cases. As a purpose-driven investor, we are most excited by companies focused on ESG challenges, such as drug discovery or advanced materials, where generative AI can bring huge societal benefits, as long as it is used in an energy-efficient manner.”
– Gareth Llewellyn, investment director at Northern Gritstone.
‘Not a replacement for human ingenuity, it’s a catalyst’
“It’s hard to overstate generative AI’s long-term potential. I’ve no doubt that VC firms will be looking closely at the technology and its utility for startups, for whom budget and talent constraints are key concerns in every phase of growth; sensible adoption of generative AI could increase output and revenue while avoiding excessive operational and capital expenditure.
“Ultimately, generative AI is an entrepreneur’s idea that has the potential to accelerate the development of countless other entrepreneurs’ concepts, when combined with human intelligence. It’s not a replacement for human ingenuity, it’s a catalyst. That being said, we need to ensure a comprehensive regulatory and legislative framework is developed ahead of mass adoption.”
– Jon Pollock, CEO of Elbow Beach Capital.