Is ChatGPT your golden startup ticket?

By now any talk of Generative AI is so widespread and cliche that opening with the phrase “Unless you’re hiding under a rock, you’ve heard of Generative AI” has itself become a cliché.

So let’s not do that.

In talking with startup founders, it’s clear that many are not only integrating AI capabilities into their startups using APIs, but in many cases building entire solutions on the back of ChatGPT.

Which is exciting, but also extremely concerning. Here’s why…

Ten years ago, I was sitting in a cubicle minding my own business, when I had a eureka moment!

“Why can’t I connect all the social networks and aggregate all contacts in one place to mine the social graph, introduce the right people to each other and become the next unicorn?”

As the idea cystalized in my mind, the neon lights above my cubicle glowed brighter and brighter. Clearly, I was onto something. Little did I know there was an electrical issue and the power went out shortly as the technicians fixed it.

I took it as a good omen nonetheless and went about my first foray into startups with unbridled optimism and made the typical first-timer mistake: diving head-first into building product.

I re-emerged 6 months later with a prototype that connected to the APIs of Facebook, LinkedIn, Twitter, etc., and grabbed everything in a not-so-smart-but-good-start way to create one big social graph for the masses.

I couldn’t believe the amount of power at my fingertips using this data. I was a couple of weeks from launch, when clearly, the smart folks at all of these big social platforms had a similar realization.

“This is way too much value we are giving these developers,” they must have been thinking.

And one by one, they closed off, or severely restricted, access to their data.

My code was made useless overnight. I may as well have been typing “all work and no play makes jack a dull boy” over and over on a big red typewriter in a haunted hotel.

As much resentment as I felt during that time (and it was a monumental amount of resentment), when I look back at it now, I realize I was the one at fault.

Which brings me to the point at hand. One of the biggest concerns I have when seeing how many startups are building upon ChatGPT is the amount of trust they are putting in that external entity.

What could go wrong? A few things:

1. They could shut off API access entirely or severely limit it, without warning, putting your app and startup out of business.

2. If you read the terms and conditions (or ask ChatGPT to explain it) it is clear that they are free to use the data you provide. The ownership of data is a gray area, but anything proprietary that you are feeding their models is now no longer only yours. This may present an issue with determining the value and ownership of your intellectual property (IP).

3. Here’s something many founders have not considered, unexpected spikes due to usage cost! If you’re basing your unit economics on an external API and charging your users a specific fee built on that model, your prices, and therefore your profit margin, will be at the mercy of price changes to the owners of the API. Changes may be small, or they may be massive, which has the potential to torpedo your progress.

4. Imagine bugs in the AI ruining your user experience! The technology that drives OpenAI's APIs is continuously evolving. As exciting as it is to ride the wave of these advancements, it leaves your startup vulnerable to the whims of progress that includes mistakes, hallucinations, biases, etc. Keep in mind that to your end user, your startup is the one serving the value. You’re the one responsible when the API you rely upon generates nonsense.

Placing the future of your startup on the shoulders of OpenAI's APIs, or any third-party tool, carries significant risks. A significant reliance upon external factors to maintain the critical business value of your startup might place you in uncharted waters, and as any seasoned sailor will tell you, unknown waters may harbor perilous currents.

With that being said, this doesn’t mean that you should ignore the considerable advantages that Generative AI APIs can offer. It can act as a huge accelerator, propelling your startup into a new stratosphere of possibilities to offer value for your users.

If you choose to navigate this course, diversify your dependencies and make sure you have enough value in other areas (so have a Plan B and Plan C). Also, develop an understanding of the legal ramifications and stay updated with policy shifts of any AI providers you leverage. Lastly, always have a contingency plan.

As the saying goes, "hope for the best, prepare for the worst."

Mark & Basil

We know the hype for Generative AI is real. But while everyone is talking about it and creating cool projects, what is actually being built to support this complex and fast growing ecosystem?

Amanda Robson and Matt Lu of Cowboy Ventures recently published an article helping to map this ecosystem of AI infrastructure startups and companies.

Generative AI will filter into every vertical, industry, and model from B2C to B2B to B2G. For any of these innovative startups to build any traction however, they will need access to safe, reliable, and cost-effective tools and platforms given the heavy-lifting that is still required to deploy AI-based solutions at scale.

That means not just tapping into a foundation model. There are supplemental data stores, labeling of data, ongoing training and inference, hosting of data, and ensuring these solutions are compliant, accurate, and bias free. This is still a tall order in an industry that is just at the ground floor.

What this also means is that now is a golden opportunity to dive in, experiment, and see where the technology goes.

The dynamic startup duo actually are not on planes this week 😂 for a change and enjoying a much needed rest.

Mark hits the road again to Tel Aviv next week for the AWS Summit where he is going to interview startup founders about what they are building. Then he is off to Sydney and Doha before landing back in the US for the AWS Public Sector Summit in Washington DC on June 8th for our Startup Industry Day. If you are in any of these spots, or know some we should meet in these places, definitelty ping us!

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