Desperate Times, Platform Shifts & New Narratives
OpenAI & ChatGPT have traction at the very moment when venture capitalists need a platform shift
ChatGPT was released on November 30th, 2022 to the public, and a few days later passed 1 million users.
The organic growth was stunning because we have long heard of how generative artificial intelligence products will impact our lives, and the demo felt like the most magical consumer product in a long time.
Within a day, many venture capitalists were proclaiming ChatGPT to be the greatest platform shift since the iPhone, sharing their own memories from 2008 Silicon Valley (it doesn’t matter that many of investors writing these tweets were in middle school at the time Apple introduced the App Store).
This is the death of Google search. The beginning of the end for software engineers. Journalists will be gone.
Venture capitalists love platform shifts. Platform shifts drive new narratives, and new narratives are usually the lifeblood of raising venture funds.
Only 40 days after ChatGPT was released, OpenAI is raising at a $29 billion valuation with top tier venture capitalists, according to The Wall Street Journal.
Microsoft is considering a $10B investment into OpenAI and it’s rumored they will integrate the technology into Bing search, along with the entire Office suite.
The valuation for OpenAI might make sense.
Sure there are legal issues, costs (currently $3M a day to run, hence the fundraise), speed, and user experience questions. But with Microsoft on board, there are distribution advantages and the technology is profound enough to dream really big.
That said, the number of startups suddenly pivoting to AI while building on top of ChatGPT by adding a thin veneer of a consumer application layer to OpenAI data sets hints that an AI bubble might be here just 10 days into 2023.
And in a recessionary climate when venture capitalists disregarded their own business models for two years, many seem eager to forget the lessons we just learned.
The time window from early traction (i.e. a million users) to proclamations of the next great platform shift have never been faster - because after a historical 2022 collapse across private markets that has often seen valuations decrease by 75%+, venture capitalists need a new narrative to survive in 2023.
ChatGPT is a groundbreaking early product with boundless use cases across content creation, media, art, science, programming, and academia.
What is less clear is whether ChatGPT and generative AI will be a product feature for startups and enterprises, or the platform shift by which multi-billion dollar venture scale businesses will be built.
For now, we should remember the lessons of the last two years, manage our expectations, and appreciate that a new product has captured consumer imagination in a moment of market distress and software pessimism.
Venture capital needed a new narrative.
But let’s be smarter than the machines while we can.