The rise of generative artificial intelligence (AI) in creating text, images, music, and videos marks a new technological era. Incumbent business leaders are eager to incorporate this technology to re-invent and enhance efficiency, benefiting existing enterprises. However, start-ups experimenting with new use cases across industries represent a significant investment opportunity in venture capital.
AI Focus Areas Today
The promise of generative AI technology to transform companies and industries continues to be touted. But which sectors will be transformed first? The impact of generative AI is starting to unfold across many domains. Let’s explore where:
Consumer Search: The release of ChatGPT by OpenAI in November 2022 took the world by storm, reinventing the way we search for information and catapulting the company into an early AI leader. OpenAI (venture-backed) and other foundation model providers, such as Anthropic (venture-backed) and Gemini (Google), have scaled quickly to mass adoption. Notably, OpenAI has added $75B in enterprise value since 2021 and is reported to be generating over $3B in annualized revenue.
Computer Programming: AI tools like GitHub Copilot and Codeium boost developer productivity by automating code generation and debugging. These tools analyze vast datasets, suggesting code snippets and reducing the time needed for complex software development. There are also start-ups building products that will generate code and programs using natural language prompting.
Customer Service: AI-powered chatbots and virtual assistants are transforming customer interactions and improving enterprise efficiency. These intelligent systems can handle routine inquiries, provide product information, respond to negative feedback, mimic speech, automate routine tasks and even resolve complex issues, enhancing customer satisfaction and reducing operational costs.
Legal: AI powered models are automating contract analysis/law and legal research. AI can sift through vast amounts of legal documents, identifying relevant information and suggesting strategies and legal language. This support will enable lawyers to focus on complex case strategies and client relationships, ultimately improving the quality, speed, and cost of legal services.
Content Creation: The rise of generative AI in creating text, images, music, and videos marks a new technological era. Incumbent business leaders are eager to incorporate this technology to re-invent and enhance efficiency, benefiting existing enterprises. However, start-ups experimenting with new use cases across industries represent a significant investment opportunity in venture capital.
Peering into the Future
While the current applications of generative AI are impressive, the future holds even greater promise as the concept of generative AI as a co-pilot evolves towards AI agents. These systems could be capable of autonomously performing and managing tasks, making decisions, and learning independently, acting as virtual assistants capable of handling complex and multifaceted administrative procedures. As AI agents become more autonomous, they will unlock new levels of innovation across an increasingly wide range of industries and processes:
Healthcare: By analyzing medical data and patient histories, AI assists in diagnosis and treatment plans. AI can improve medical imaging and diagnostics by augmenting imaging technology skills like CT scans, MRIs, and X-rays, which can lead to more accurate and timely diagnoses. Moreover, automating scribing (and eventually charting) of patient visits can dramatically improve fatigue of doctors, who experience high levels of burnout. Healthcare administrative costs have skyrocketed, and AI tools will reduce the complexity associated with patient routing, staffing, billing/coding, clinical documentation, and patient engagement.
Drug Discovery: By analyzing vast amounts of biological data, AI can identify potential drug candidates, predict their efficacy, and optimize molecular structures, thereby enhancing the precision of drug development. Median time to approval for drug candidates has dropped to 6 years on average as of 2023 (from 10 years historically)1.
Robotics: Founders are incorporating AI into the physical world through robotics, with promising early results, potentially paving the way for commercial and personal robots to become mainstream and with human like capabilities. By generating diverse robot behaviors and learning from real-world interactions, these machines could become increasingly capable of performing complex tasks as well as repetitive tasks including wielding, packaging and assembling.
Content Creation: AI-driven personalization can enhance customer experiences in industries like e-commerce and entertainment, leading to increased customer engagement and retention through personalized ads and content. Prompting can spark creativity used in drafting blogs and news articles. The prospect of deeply personalized shows and movies generated quickly by AI, including photo-realistic and animation, could change the way we consume media.
Accounting and Finance: Automating tasks like data entry, report generation, and fraud detection is within reach. Generative AI could also be used to develop financial models, predict market trends, and provide personalized financial advice.
Sales and Marketing: AI could create personalized marketing campaigns, predict customer behavior, and optimize sales processes. It could also be used to develop new sales strategies and identify untapped market opportunities.
Both entrepreneurs and venture capitalists believe generative AI will be a once in a generation opportunity. The applications look broad and diverse, with the full potential of this technology yet to be realized. The state of the AI transition is early, but promising. We encourage investors to take a long-term perspective, as they look to capture exposure in the next crop of category defining companies.
1 Source: BCG Unlocking the Potential of Al in Drug Discovery (Jun 2023).
