Tag Archives: Artificial Intelligence

AI: Capital Bonfire?

March 21, 2023 tremendousblog Leave a comment

AI is the biggest opportunity in 20 years. It could also kill countless VC funds.

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I took a sip of some yummy espresso last Thursday and plopped down at the laptop. Time to dig into a deal memo from a VC I really respect.

He laid out a clear view of AI’s future. And if you’re an investor, it’s scary. 😲

Tons of startups are all racing to become the next hot thing in AI. They’re all doing the same things with the same tools.

Most will fight each other to the death. With differentiation nonexistent, margins are headed to zero.

Now, what if we add VC’s with billions and a bad case of FOMO?

A bunch of massively overfunded companies will fight to the death. No one will make money.

And many AI-heavy funds will be destroyed. Or as this investor put it, we are headed for a “capital bonfire.”

I tried to poke holes in his argument. But I couldn’t.

It’s not that hard to integrate AI tools into software. A founder I know did it in just 6 hours using OpenAI.

If you’re not something more than a wrapper for OpenAI, you’re not going to make it.

Geez Francis, you really hate AI, don’t you?

Not at all! I think ChatGPT and similar technologies are an incredible revolution.

But just because a new technology is incredibly useful doesn’t make it profitable. Toasters are very useful, but making them isn’t a great business.

There are too many other companies making the same thing.

Aggravating the defensibility problem are massive valuations.

I’ve seen AI companies with no revenue raise “seed” rounds at $150 million or more. I even saw an AI hardware company recently raising “seed” at over $400 million!

These valuations don’t make sense for companies that are barely off the ground. As Fred Wilson of Union Square Ventures has proven, investors can’t make money with $100 million seed rounds.

So who wins in AI?

Big tech will be huge winners. Microsoft practically owns OpenAI.

It has also integrated AI into all its Office products. You can even ask your calendar to prepare you for an upcoming meeting!

Microsoft owns the platform many people already use. Then they serve this captive audience some great AI features.

That’s a winning model.

Another winning model is focusing on data. I’m looking for companies focusing on unique data sets, data cleaning, and better data processing.

Data fuels every AI model. Better data means better outputs.

Even if many AI companies go bust, selling data services can still be a great business. Airlines have a way of going bankrupt, but Saudi Arabia’s doing pretty well selling them fuel.

Let other investors drop money onto every AI startup from a helicopter. I’ll be taking careful kill shots at big game.

After all, we only have so many bullets.

Where do you think AI is headed?

Google is Losing the AI Race

January 25, 2023 tremendousblog 4 Comments

Today, Google is the king of search. But is it about to be dethroned?

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The search giant seems to face a new competitor every day. ChatGPT launched on November 30, with Perplexity and Allsearch coming shortly thereafter.

The “page of links” is starting to look antiquated.

Meanwhile, with nearly 200,000 employees, Google has released nothing in response. But new reports indicate Google may finally release a competitor this spring:

In addition to an ethical AI chatbot such as LaMDA, Google is now planning to reveal 20 more AI-based products at its I/O conference scheduled for May 2023. ChatGPT has sparked worry about the use and viability of conventional search engines, as the chatbot aims to provide answers to searches instead of just giving relevant links to users.

Taking over 5 months to respond to a mortal threat to your business is unacceptable. Google should’ve worked day and night to produce a ChatGPT competitor within 90 days.

So what’s the holdup?

Google has shown wariness in revealing AI products and services, especially with the raging debate on the ethics of using AI, with the potential for bolstering biases present in training data. All current AI offerings by Google are heavily restricted in terms of what they can be used for.

Large companies are obsessed with risk. Meanwhile, startups have to release something or they’re dead in the water.

By the time Google does release a competitor, it may already be outdated. OpenAI’s GPT-4 may come out in the first half of this year.

I don’t know what GPT-4 will be capable of. But seeing the massive improvement between GPT-3 and ChatGPT, I expect it to be very impressive.

How fast you launch and iterate is especially important in AI because AI tools can improve at incredible speed. From a recent column by economist Tyler Cowen:

ChatGPT, the model released late last year, received a grade of D on an undergraduate labor economics exam given by my colleague Bryan Caplan. Anthropic, a new LLM available in beta form and expected to be released this year, passed our graduate-level law and economics exam with nice, clear answers.

If that wasn’t impressive enough, ChatGPT and another chatbot just passed the United States Medical Licensing Examination. I certainly couldn’t do that!

Maybe Google will release a ChatGPT killer and blow us all away. But I expect to see it fall further and further behind, mired in complacency and risk aversion.

What do you think the future holds for Google? Leave a comment at the bottom and let me know!

I Pitched a Robot VC

September 1, 2022 tremendousblog 4 Comments

Every day, founders pitch me on their startups. This morning, I thought “Why not turn the tables for a change?”

So I pitched 3 VC’s on a startup idea. But they weren’t your usual investors — all 3 were robots. 🤖

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These robot VC’s live on a new platform called PitchExpert. They use GPT-3, a form of AI, to ask questions and help you refine your pitch.

I started with an elevator pitch:

It costs $10,000 or more to move into an apartment in many cities. The average person can’t afford that. We provide a loan so you can move into a great apartment today!

Here’s what the grizzled veterans had to say:

VC 1:

I like it! You’re onto something with this idea. Here are a few suggestions to make your firm more attractive to investors and increase its valuation:

Make sure you have a solid business model in place. Figure out how you’re going to generate revenue and profit from this service.
Do some market research to validate your assumption that there is indeed a need for this service. Talk to potential customers and get feedback on what they think of the idea.
Put together a strong team of co-founders and employees who can execute on the business plan and grow the company successfully.

Hey hey, not a bad reception! And talking to potential customers and figuring out an exact revenue model are great suggestions.

VC 2

Make sure you are clear on your target market. Who is your ideal customer?
Do your research on the competition. What are they doing and how can you differentiate yourself?
Have a solid plan for how you will make money. How will this business be profitable?

Not quite as sunny but probably even more useful. Knowing everything about potential customers and competitors is a good tip.

VC 3

This is a terrible idea.

Don’t try to solve the problem of high rent prices.
Instead of a loan, try a subscription model where people pay a monthly fee.
Use that money to help people move into better apartments.

Jerk. I’m going to unplug this guy.

What’s more, a subscription model when people move only occasionally doesn’t make much sense. Why would you pay for a subscription to something you use only once every 5 years, for example?

I’m actually amazed how spot on the first two VC’s were.

I like the mix of VC’s: Mr. Friendly (VC1), Mr. Just the Facts (VC2), and Mr. Abrasive (VC3). It mirrors real life.

I found VC2 to be the most helpful. His suggestions made a lot of sense and could help me refine the business model.

As an investor, I try to be closest to VC2. I mostly ask questions and don’t offer too many judgements, positive or negative.

I am mostly there to learn, not to direct the founder.

What do you think the robot VC’s got right? What did they get wrong?

Leave a comment at the bottom and let me know!

More on tech:

Where Are All the Startup Acquisitions?

Mark Twain: Venture Capitalist

The Power Law (Part One)

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Machine Learning Engine Predicts 20% Rally in AMC in Next Month

September 16, 2021 tremendousblog Leave a comment

I came across a fascinating little tool today. It’s a machine learning program designed to forecast returns in stocks.

It’s called the Trefis AI Engine and it draws from 8 years of past stock returns.

Given the intense interest in stock of AMC Entertainment Holdings, Inc., I had to see what the oracle would say.

AMC is up 34% in the last month. Based on past scenarios, what does the next month have in store?

The machine learning engine predicts a 20% return over the next month in this scenario.

Machine learning is a series of algorithms that can be used to identify patterns and make predictions. It powers Google search, Netflix recommendations, and even self driving cars.

Will the genie be right? I honestly don’t know. But I find the tool an interesting thing to play with.

Type in some scenarios of your own and let me know what you find in the comments at the very bottom of the page!

Kudos to Forbes for the tip.

Robot Hands, Vertical Farms, and the Future of Food

August 30, 2021 tremendousblog 3 Comments

On Saturday, I stood in the produce section of a nearby Whole Foods. My eyes were drawn to tiny packages of delicate microgreens. The producer: Aero Farms.

Agriculture faces a difficult environment. Climate change is making weather more extreme and unpredictable. Workers are harder and harder to find. But a new model of farming is emerging, and it looks like nothing else we’ve ever seen.

Aero Farms grows greens in vertical stacks in what was once an abandoned steel mill. The farm is in gritty Newark, NJ, just a few miles from the Whole Foods where I encountered their product. They use 95% less water and 99% less land than a traditional farm. And unlike other farms, they can grow year round.

Technology is also revolutionizing how produce is picked. A company called Root AI makes soft, robotic hands that can pick anything from a hearty cucumber to a fragile strawberry. Alongside the robotic hands is a camera enabled with AI, which can identify the ripe produce and leave the rest to grow.

Seeing it in action feels like seeing the future:

These robots are now being put to use in giant warehouse farms that you could easily mistake for an Amazon Fulfillment Center. These are a project of AppHarvest, which claims they use 90% less water and are 30 times more productive per acre than a traditional farm.

Is that an Amazon Fulfillment Center in your pocket, or are you just happy to see me?

Even if the company’s projections are a bit optimistic, there’s strong evidence from numerous producers that indoor farming uses dramatically less water and space. And with the farm just a few miles from its customers in major cities, transportation costs and emissions are cut to the bone.

Putting robotics and indoor farming together, I think we are headed to a future that produces more output (food) with far fewer inputs (labor, water, land). And unlike human labor, electronics tend to rapidly decrease in price. That will only speed their adoption and lower food prices further.

To quote Lincoln Steffens:

“I have seen the future and it works.”

Tremendous

Tag Archives: Artificial Intelligence

AI: Capital Bonfire?

Google is Losing the AI Race

I Pitched a Robot VC

Machine Learning Engine Predicts 20% Rally in AMC in Next Month

Robot Hands, Vertical Farms, and the Future of Food

An angel investor's take on life and business