VCs discuss why most consumer AI startups still lack staying power

Three years into the generative AI revolution, it's evident that many startups are still thriving by catering to businesses rather than individual consumers. Despite the rapid adoption of general-purpose large language models (LLMs) like ChatGPT, specialized GenAI applications for consumers have struggled to find their footing. Chi-Hua Chien, co-founder and managing partner at Goodwater Capital, shared his insights during a recent TechCrunch StrictlyVC event. He noted that while early AI applications in video, audio, and photography were initially exciting, competition has intensified with the emergence of new players like Sora and Nano Banana, alongside Chinese open-source video models, diminishing many opportunities. Chien likened some of these early applications to the initial excitement surrounding third-party flashlight apps post-iPhone launch in 2008, which eventually became integrated features in iOS. He emphasized that, similar to the smartphone era's growth, AI platforms require a period of stabilization for sustainable consumer products to emerge. He believes we are on the brink of a significant shift akin to the mobile boom of 2009-2010, which birthed major consumer brands like Uber and Airbnb. Signs of this stabilization may be emerging, especially with Google's Gemini achieving technological parity with ChatGPT. Elizabeth Weil, founder and partner at Scribble Ventures, echoed Chien's observations, describing the current landscape of consumer AI applications as being in an "awkward teenage phase." The question remains: what will propel consumer AI startups into maturity? Chien suggested that a new device, beyond the smartphone, might be necessary. He pointed out that a device users engage with hundreds of times daily, yet only captures a fraction of their reality, may not be sufficient to unlock AI's full potential. Weil concurred, indicating that the smartphone's limitations might hinder the exploration of innovative consumer AI products. Both industry leaders highlighted ongoing efforts to develop new personal devices that could replace smartphones. OpenAI and Jonny Ive, Apple's former design chief, are rumored to be working on a compact, screenless device, while Meta's Ray-Ban smart glasses feature gesture controls via a wristband. Various startups are also experimenting with AI-enabled wearables like pins and rings, though with mixed success. Despite the reliance on new devices, some AI consumer products might not be device-dependent. Chien proposed the idea of a personal AI financial advisor tailored to individual needs, while Weil anticipated the rise of personalized, always-available tutors, facilitated via smartphones. While both experts are enthusiastic about AI's potential, they expressed caution regarding the development of AI-driven social network startups. Chien critiqued these platforms for creating environments where AI bots engage with user content, transforming social networking into a solitary experience. He noted that the essence of social networking lies in the interaction with real people, not just algorithms.