A VC's perspective on riding the definite wave of generative AI

In recent years, the realm of artificial intelligence (AI) has seen significant advancements, and one branch that has captivated the imagination of tech enthusiasts and entrepreneurs alike is Generative AI. The new-age technology has the potential to revolutionize industries, spark innovation, and shape the future of business. The space is the new frontier of venture capital investment, and it’s no surprise that VCs are pouring in record cash in this space. According to Pitchbook, the investment in the space has increased by 425% since 2020 to $2.1bn invested in 2022 alone. In India, the VCs are also eager to invest in this space. 

While the space holds tremendous potential, it also comes with its own set of challenges, which VCs are keeping a close eye on. One includes, the ethical implications surrounding the technology. For instance, the ability of AI to create highly convincing deep fake videos has raised concerns about its potential misuse for spreading disinformation or damaging reputations. Additionally, the ownership and copyright of AI-generated content raise complex legal questions that require thoughtful consideration. One of the other big issues is the quality of the data used to train the AI.

Another challenge lies in data privacy and security. The models typically require large amounts of data to generate accurate and meaningful results and ensuring the privacy and protection of this data becomes crucial, especially in data-sensitive industries such as healthcare and finance. As the technology becomes more advanced, it raises questions about ownership, privacy, and accountability.  Another big question is the sustainability of the present algorithms – the carbon footprint needs to be kept in mind. 

Despite the challenges, the space, as we see it, offers remarkable opportunities for businesses to innovate and gain a competitive advantage. It has the potential to transform the customer experience, streamline operations, and drive new revenue streams and many more.

As an investor in the space, we believe that generative AI represents a definite turning point in the technology landscape. Startups leveraging this technology have the potential to disrupt established industries and drive innovation across sectors.

The demand for this space has grown exponentially, and while the debate rages on its issues, everyone recognizes the transformative power it holds. This space will open exciting opportunities with startups actually working on core research & improving the algorithms, while others trying to create opportunities using Generative AI as their core offering and the ones further lower in the pyramid use Generative AI as part of their offering.  As a VC, one needs to understand their comfort levels and strengths to pick startups among these layers.

The surge of interest in space has started a definite wave that is expected to continue for years to come. But investors would do good not to get swept up by all the hype and ensure sound fundamentals of any investments prevail. It would also be good to invest in companies that are addressing the ethical implications of Generative AI. The content that generative AI can create is truly limitless and could be highly transformative.

So what’s next in this space?

Generative AI holds immense promise. We can expect advancements in areas such as natural language processing where AI systems will be capable of generating coherent and contextually relevant text, enabling applications such as automated content creation and personalised chatbots.

Furthermore, the integration of this technology with other technologies, such as augmented reality (AR), and virtual reality (VR), will open up new frontiers of immersive experiences. The research community is actively exploring techniques to make Generative AI models more interpretable and controllable. Addressing the “black box” nature of AI-generated outputs will enhance trust and facilitate wider adoption across industries.

Generative AI has come a long way, transforming from a realm of research to a disruptive force with real-world applications. We are witnessing a definite wave of interest and investment in this space. While we should not forget about the challenges such as ethics and data privacy, which need to be addressed.

To fully capitalize on the opportunities presented by this space, collaboration among researchers, businesses, and investors is crucial. By fostering responsible development, ethical use, and continues exploration, we can unlock the true potential of generative AI and create a future where intelligent machines augment human creativity and productivity. As the technology continues to evolve, we expect more startups to emerge in this space.

Ajay Jain

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Ajay Jain is the Founder and Managing Partner at Silverneedle Ventures.