[cornholio]

And most of those "companies" are shims over GPT. Zero moat, fake it till you make it mentality, gather investor money and maybe we'll roll our own in good time.

Don't know how I feel about that, it quacks like a bubble but there is massive value that can be delivered.

[nikanj]

It's the model familiar from previous bubble rounds: 1) Get funding 2) Put a lot of effort into appearances and presence 3) Get acquihired by Google / Microsoft / et al.

[version_five]

The chatbot tools are unlikely to be faang material. I'd guess more likely the targets now are places like Salesforce that probably can find a way to claim value from adding some text generation.

[whiplash451]

Except step 3 is going to be a lot harder these days. You’d better have a strong story to sell something to Satya.

[whiplash451]

Sure. But as a VC you will look like a schmuck if you don’t invest in at least some AI startup.

[palata]

> Zero moat, fake it till you make it mentality, gather investor money and maybe we'll roll our own in good time.

Isn't that the textbook definition of a startup?

[cornholio]

I don't think so. The textbook definition, at least what I understand from the YC literature, is that they have a deep insight and technical ability to execute it, so by moving fast they create the moat. They aren't faking it, the potential of a company and market share is there in the ingredients but they lack the runway to quickly take off.

For example, Tesla vs Nikola. One set of founders had a powerful vision and technical ability to see it through (yes, even Elon, say what you want about him but he has deep technical insights, moreso for his cofounders). The other set had a good funding catchphrase "Electric cars, but with trucks!" and tried to fake their way forward using copious amounts of VC money. Many of these companies sound like "AI, but with ... !"

[palata]

> They aren't faking it, the potential of a company and market share is there in the ingredients but they lack the runway to quickly take off.

How do you explain that the vast majority of startups fail, then?

IMO the best a VC can do is check that the startup they invest in is not an obvious scam. But then it's impossible to predict which technologies will work and which will not. So they just diversify, counting on the fact that a few of those startups will bring significant money at some point.

Sure, they like to share their "vision" and "predictions", just like traders probably like to share their opinion on the stocks they buy. But at the end of the day, they don't know, they just diversify their investment.

[tiborsaas]

This is needlessly dismissive. How many SaaS startups are "shims" over linux, docker, or node.js? It's still the idea that counts. GPT is a massive enabler and this data clearly shows that. I get that the barrier to entry is at all time low, but is that a bad thing?

[version_five]

Shim over linux?

Right, how many products are just shims over the CPU instruction set.

[newswasboring]

Most kernels and some OSs.

[mfru]

i don't think that is true. ideas are basically statistics. someone will have a great idea somewhere, but until that idea gets executed, widely spread and tested by reality it will remain as if basically not having been had.

so no, i don't think that the idea is what counts.

[admissionsguy]

Wasn't YC always explicit (at least if you read between the lines) about looking for founders with good pedigree regardless of having a feasible product?

[version_five]

Yes and that makes sense as an investment thesis. But what happens when you attract a bunch of ambitious people with great pedigree and then either steer them or select for jumping onto a hype bubble at it's peak with an undifferentiated cobbled together offering?

That's what concerns most about this, is how somehow it looks like they've optimized for a bunch of "follower" founders.

[cornholio]

But I really wonder how many of these founders can convincingly explain in 5 minutes how gradient descent or transformers work. I know that's the first type of question I would ask any founder of an AI company before investing.

[admissionsguy]

The typical thinking among businesspeople is that you can always "hire a nerd" for those things. The early YC was a departure from that with PG praising technical prowess in his essays so much. It would seem this mindset has much less sway now.

[palata]

Do VCs understand that? Do they care? My feeling is that they want to see a projected growth that looks like an exponential, and buzzwords.

[mmmmmbop]

The combination of gradient descent and transformers is a weird choice to ask founders about. One is an almost trivial algorithm, whereas the other is a cutting-edge research result.

[koito17]

Yup. As far as I can tell, OpenAI is pricing at steep losses at right now. It makes me wonder what businesses and individuals will do once OpenAI runs out of money to subsidize everybody and massively increases their prices.

[IanCal]

> As far as I can tell, OpenAI is pricing at steep losses at right now

How do you figure that? Given the speed that the gpt4 API returns data I feel like it's easily going to cost more than pretty pricy hardware.

[ano88888]

well, paid users are increasing exponentially. 10 million paid users are 200 million monthly revenue already and it is just one source of their revenue.

[smt88]

OpenAI is nowhere near 10 million paid users, and $200M MRR doesn't necessarily mean you have any profit. We have no idea how expensive it is for them to serve that many people.

[whiplash451]

How do you know? Given the worldwide buzz and a small sample around me, I wouldn’t be surprised at all if OpenAI already had 10M paid subscribers.

[smt88]

> How do you know?

I don't know for sure, but I've been in software for decades and you don't just get 10 million people to pay for something in a few months. Conversion rates are always lower than people expect.

For something like ChatGPT, the math is going to be something like this:

- something like 150M unique users have tried it[1], which is probably < 50M people (I myself would look like at least 5 users)

- most will never try it again

- of the ones who try it again, a very tiny minority will be interested enough to pay for it because it's just a novelty to the vast majority of people (the only people I know using it for work are researchers and content marketers)

- of the ones interested enough to pay for it, only a fraction will

So I'd wager they're in the territory of 20k-500k users, not 10M.

> Given the worldwide buzz and a small sample around me

People who are educated, live in the West, and pay attention to news always dramatically overestimate the number of people with a similar media diet. ChatGPT is discussed in your circles far more than elsewhere. There are literally billions of people who haven't heard of it or don't care.

Don't let your anecdata fool you. Your sample is not representative of humans at all. 60% of the world lives in Asia, after all.

1. https://www.reuters.com/technology/chatgpt-sets-record-faste...

[whiplash451]

I don't think that our experience in software engineering applies very well to understand what is happening with ChatGPT.

Here is the math I do, starting from the addressable market.

There are 60M professional workers in the US [1].

The number is probably similar in EU and APAC.

This yields ~200M professional workers in the world.

If 5% of them have a paid subscription, that's exactly how you get 10M paid subscribers.

Of course, the debate is around the 5%. The rate in the pure tech industry is much higher (10-20% around me), and it is probably much lower in other areas (e.g. architecture). But 5% as an average is not unrealistic.

[1] https://www.dpeaflcio.org/factsheets/the-professional-and-te...

[ano88888]

Good analysis. Thanks. It is something to think about for all AI startups.Adoption will take much longer than you think.

[dang]

As far as I saw from helping the startups with Launch HNs this batch, many if not most of the AI ones were pivots—in other words, YC originally funded them to do something else. Just FYI.

[bsder]

VCs gonna fad. They want their businesses to go boom or bust within 24 months.