We've entered the age of generative AI, and use cases are everywhere: from writing articles to creating comics to editing films, it's growing faster than every consumer tech trend of the past decade. ChatGPT, a text-generating tool, has attracted more than 1 million users in just five days, and tens of millions of users have already created AI avatars.
Whenever a new technology grabs consumer attention so quickly, it begs the question: Is it really valuable? Generative AI will be the primary underlying technology for entrepreneurs to build products.
Just as the iPhone revolutionized the way we interact with technology every day, it gave rise to products like Uber, DoorDash and Airbnb. Generative AI will also change our daily lives. In addition to creating new product categories, AI will enhance existing products, enhance the consumer experience, and expand their use cases.
One of the most powerful features of AI is that it can make products more personalized. Early applications of this are mostly in the realm of edtech and search — if you want to explain why it's raining, it's going to be different for an eight-year-old than it is for a high school student, and this personalization will be a core value proposition for many AI-powered products.
Here's a deep dive into some of the new entrepreneurial opportunities and questions a16z asks when investing in these AI applications.
01
Search
Search: Large language models have the potential to revolutionize the core functionality of the Internet.
We've all had the experience of typing a question into Google and then being inundated with a flood of resulting links, some of which even provide contradictory or inaccurate information. Wouldn't it be great if you could get a concise answer written in natural language with a link for you to read further?
Companies like You and Neeva are offering this kind of service for Universal Search. Others take a more vertical approach: Consensus searches research papers to provide evidence-based answers, while Perplexity's original Bird SQL product searches for Twitter graphs.
This type of search is valuable for product recommendations. When we shop online, we often need to go through dozens of links and hundreds of reviews before we can make an informed purchase decision. Wouldn't it be great if you could get a curated list of options based on your specific needs, such as: "Best Dog Food for a Six-Month Old Labrador with Sensitive Stomachs" or "Camel Coats Under $250 in New York Winter".
In addition, a16z sees great potential for applications for internal search. Currently, most companies are using multiple communication apps and databases, such as Gmail, Slack, Drive, Asana, etc. Finding a single document, message, or metric in these tools can be challenging. While products like Glean allow teams to search across applications, Vowel enables users to query the content of their video conference recordings.
02
education
EdTech has used to be a trade-off between efficiency and scale. To create a product for the masses is to lose the individuality that appeals to individuals, and to create a perfect product to meet individual needs, the cost of scale is too high.
With AI, there is a solution to this contradiction. We can now deploy personalized learning Xi programs at scale, giving each user a "teacher in their pocket" to understand their unique needs and answer questions or take aptitude tests.
Imagine an AI-powered language teacher who can talk in real-time and give feedback on pronunciation or phrasing. And we're seeing that Speak, Quazel, and Lingostar are already doing it, launching products that cover almost every discipline. Apps like Photomath and Mathly can guide students to solve math problems, while PeopleAI and Historical Figures teach history by simulating chats with prominent figures.
In addition to learning Xi specific subjects, students also utilize AI assistants in their assignments. Tools like Grammarly, Orchard, and Lex can help students overcome writer's blockage and improve their writing. Other forms of content generation products are also growing in popularity in high schools and colleges across the country – for example, Tome and Beautiful.ai can help when making PPTs.
03
socializing
A16z doesn't think technology will completely replace human interaction, but it can at least make us feel less lonely. Listening and responding are very important for conversational conversations, and AI chatbots can play this role.
For evidence of this, check out the Reddit reviews of AI chatbot products like Replika, Anima, and CharacterAI. Many users find true meaning in their relationships with these bots, spending hours each week talking to them. This consistency in experience is already comparable to Gen Z's Snap streaks.
AI can also enhance and even strengthen relationships. Tools like Millie and YourMove can optimize dating apps' profiles and messages, while apps like Mumkin help users navigate difficult conversations. Eventually, we might all have an AI chatbot that reminds us when to connect with friends and family and prompts us to send the right message.
In addition, AI can even help us connect with people who are deceased or unreachable. Have you ever wished you could hear the story of a deceased family member again, or get some advice from someone you haven't been in touch with in years? Some have already tried this idea. It's not hard to imagine another world where we all have an AI-powered "digital twin" and have gone through all of our text and speech training. For some entrepreneurs, this exploration has already begun.
04
Medical & Professional Services
a16z expects to see more AI chatbots for professional and even clinical applications in the future. AI-powered therapists, nutritionists, coaches will benefit millions of users around the world. It's going to be a system of round-the-clock support – users can just open the app and ask questions or start conversations.
Early research has found that chatbots may be effective in treating mental health. Products like Woebot and Wysa have demonstrated clinically validated results and received FDA designations for effectiveness in treating conditions such as postpartum depression, chronic pain, and anxiety. At a time when more than 25% of adults suffer from a diagnosable mental health condition and a national therapist shortage, chatbots may be a viable solution for non-acute cases.
In addition to the healthcare sector, a16z is also starting to see the emergence of other AI tools and "coaches" that are specifically designed to assist with specific tasks. For example, InterAlia can help you style outfits, Prodigy AI can give you career advice, and Poised can improve your communication skills.
I believe that one day, we will all have a personalized chatbot that understands the unique context of our lives. Faced with a life change, such as getting divorced, going to college, or having a baby, we will get a piece of advice from the "resonant party". We can seek support or guidance as we work toward our goals, whether it's fitness or improving our finances.
05
creation
Generative AI lets us bring imagination to life: when it works correctly, it feels like magic. Content creation has become the first mainstream use case for generative AI, just like the Lensa we've seen. Remember when your circle of friends was swiped by photos of your friends turned into superheroes, astronauts, and anime characters?
Portraiture is just the beginning. Generative AI products will serve a variety of use cases, from consumers making content "just for fun" to creators or solopreneurs monetizing content. We're seeing generative AI tools across almost all mediums:
- Art: Products like Midjourney and Stable Diffusion allow users to input prompts and styles, then get AI-generated artwork.
- Writing: Although products like Sudowrite and Verb.ai are used in professional writing genres, such as novels, ChatGPT still leads the market.
- Video: Descript and RunwayML are expanding from generative video editing to authoring, while products like Linum, QuickVid, and Synthesia are being used to generate new video content.
- Design: Canva has integrated AI, and Microsoft is testing its own AI design platform. They will also compete with startups like PhotoRoom and Magician.
- Audio: Products like Boomy and Riffusion create music from scratch, while Murf.ai and Resemble offer studio-quality dubbing.
Over time, we're likely to see more professional-grade generative AI products emerge.
Many AI tools are still flawed (such as the sudden appearance of three arms in a photo) or take a long time to process a request. This is acceptable for most entertainment consumers, but if you're trying to monetize your content, that's the problem. To meet the needs of those advanced users, a16z expects many companies to launch a "pro" version of the service that offers a higher quality of service, just like what ChatGPT is already doing.
06
Game
AI is likely to play an important role in gaming, and there has been extensive discussion among a16z partners about this. Generative AI will make it easier, faster, and cheaper to make high-quality games, while allowing players to truly customize their gaming experience as well.
Popular games often cost millions or even billions of dollars to make. Because in addition to the game's storyline, developers need to generate thousands of media assets, from the graphics themselves to the 3D models to the soundtracks.
The vitality of these high-quality triple-A games comes from the labor and vision of human artists. While AI is unlikely to completely replace them, a16z believes that AI will provide powerful support to these artists and their teams, allowing them to use their time more efficiently, launch games faster, and reduce costs.
We've seen AI tools like Scenario and Iliad create game assets, and platforms like Promethean to build entire virtual worlds. You can even spawn non-player characters (NPCs) using products like Inworld, Charisma, and Convai.
AI will not only drive the creation of more games, but it will also drive the development of a new type of game: one that is more dynamic and more customizable to each player's preferences. We've already seen some prototypes in text-based games like AI Dungeon and Hidden Door. Imagine entering a game and designing a complex custom avatar in just a few words. Eventually, this may expand to entire virtual worlds that you can create from scratch.
07
Corporate Services
Tools that serve small businesses will be a killer use case for generative AI. There are 32 million small businesses in the U.S., which have provided more than half of the net new jobs since 2000. These businesses play a vital role in the U.S. economy, but they are often understaffed and overwhelmed, especially in the recent labor shortage.
AI tools can have an immediate impact for many of these businesses: a pair of offers and an extra hand. Although they may be somewhat unreliable, they are still invaluable. AI tools and their corresponding use cases are also growing: Sameday can answer calls and book appointments, Truelark can handle SMS, email, and chat, Osome can manage the back office, and Durable can create a complete professional website.
Many general-purpose content creation tools, such as Jasper, Copy, and Writer, have made significant progress in their use by small and medium-sized businesses. a16z is also starting to see vertical tools tailored to specific types of enterprise workflows. For example, products like Harvey and Spellbook help legal teams automate tasks such as reception, research, and document drafting. In the real estate space, Interior AI enables brokers to virtually lay out properties, while Zuma helps property managers convert leads into scheduled visits.
And in this space, the most fruitful vertical has been e-commerce. Most of these businesses operate entirely online, which makes it easy for them to integrate AI tools into many parts of their workflows. In a world where customer acquisition costs are rising, brands are willing to experiment with products that may help them reduce costs, increase conversions, and increase customer retention.
Tools like Flair, Booth, and Bloom help brands create eye-catching product photos, which are important for businesses to sell to online shoppers. A static photo of a dress hanging on a hanger can be turned into a picture of a woman walking in the garden in this dress. a16z anticipates that these uses will eventually become hyper-personal: a photo of a sofa can generate a photo of it in your apartment.
In addition to product photos, many types of content created by brands can now be greatly enhanced with AI as well. Products like AdCreative and Pencil can create marketing materials for email or social media, while Frase or Writesonic can write search engine-optimized product descriptions. Ultimately, users may simply describe the aesthetics they want, click a button, and create an entire eCommerce store along with marketing materials.