Funding vs Revenue in AI landscape: It's all topsy turvy
Will the trend reverse?
As of now, all the competition is in application layer - and it seems all the big money is going in foundational layer (pic courtesy
).Sounds crazy, right? After all, if you look at combined fund raised by OpenAI ($14Bn) Anthropic ($7.3Bn) and the revenue scale (OpenAI revenue is ~$3.4Bn / Anthropic is expected to hit ~$850mn by end of 2024 while Perplexity was at $20mn last year) - it is clear that right now, there is a LOTTT of money going in and out of the foundational layer.
And application layer (in fact, mostly subscription businesses) is where all the startup action is - but with very little money and revenue.
Ahh…the typical startup world, right?
Sounds like a losing deal? I don’t think so.
3 years from now.
I’d like to believe that the trend will reverse as foundational / computing layers will get commoditized (it already is) and what’ll matter is the operational and application layer.
With open source models catching up, expect commercial foundational models to start solving for vertical use-cases (OpenAI is already going deep in healthcare with ThriveAI) and will eventually launch more application layer businesses.
And at the application layer, one of the big drivers will be understanding customer’s JTBD (jobs to be done). The teams that have their ear to the ground and agile operations will continue to beat the ones stacked with funding and PR announcements.
And yeah, the biggest challenge is that CIOs are still not confused about putting AI to production.
The AI winter will start soon. Who do you think will win in the long run?