Better AI Models, Better Startups

Coming Up (00:00:00)

• OpenAI product releases generate anticipation and concern among startups.
• Improved AI models benefit all startups.
• Startups should monitor AI announcements and plan accordingly.

AI Challenges for Startups (00:01:22)

• OpenAI's demos focused on consumer applications, posing challenges for YC-funded consumer companies.
• Competition with OpenAI involves both product quality and distribution.
• The increasing capabilities of AI models, such as code generation, create new opportunities for startups.
• Better models simplify integration with regular business logic.
• Multiple powerful AI models are preferable for startups to avoid dependence on a single provider.

GPT-4 vs. Gemini 1.5 (00:05:00)

• Key difference between GPT-4 and Gemini 1.5 is how they handle different types of data.
• GPT-4 uses a text-based Transformer model with added modules for speech and video processing.
• Gemini 1.5 is a true mixture-of-experts model that activates specific paths for different data types, making it more energy efficient.
• Gemini 1.5 has a context window of a million tokens, which is significantly larger than GPT-4's 128,000 tokens.
• Google's demo at I/O missed the mark compared to OpenAI's demos.
• Gemini 1.5's white paper reveals it to be a true mixture-of-experts model, which is a new technique.
• Gemini 1.5 is trained from the ground up with actual text, image, and audio data, allowing different parts of the network to activate depending on the data input.
• Google's TPU infrastructure enabled them to train Gemini 1.5 on a large amount of data, making it very energy efficient.
• Gemini 1.5 has a context window of a million tokens, which is significantly larger than GPT-4's 128,000 tokens.

RAG future in consumer apps (00:08:32)

• The emergence of advanced AI models may impact startups focused on rack infrastructure tooling.
• Privacy-conscious individuals still prefer rack systems for data storage and control.
• Infinite context windows enable the development of more advanced consumer applications with comprehensive user knowledge.
• Open-source models like Olama allow users to train personal AIs with their own data.
• Rack infrastructure remains crucial for long-term permanent memory storage and privacy concerns.
• Chat GPT's memory feature demonstrates the development of user-specific memory based on interactions.
• The accuracy of retrieval from an infinite context window may not always be reliable.
• Rack infrastructure is still necessary for precise information retrieval and privacy concerns.
• The complexity of context windows requires careful management and optimization.
• A smaller but reliable context window is preferable to a larger one with uncertain behavior.
• Enterprises prioritize data privacy and logging, making a giant context window less desirable.
• Companies like Google, Anthropic, and Meta may enter the market with comparable technologies.
• Founders are already using different models for prototyping and scaling, and the ecosystem of model routers and observability Ops software is rapidly progressing.
• Startups should not be overly concerned about model releases, as they are usually not reliant on any single model.

Diverse AI Options (00:15:19)

• Diverse AI options prevent monopolies and promote market competition.
• Many companies making a billion dollars each is preferable to a few companies worth trillions.
• Meta has a large GPU cluster for training recommendation models to compete with TikTok.
• The GPUs turned out to be valuable for training large language models.
• Startups are worried about being crushed by OpenAI or Google.
• OpenAI product releases create anxiety among startups about their survival.
• This situation is similar to when startups were concerned about Google and Facebook in the past.
• The best response to concerns about competition from big tech companies is to consider the possibility of those companies entering the VC space.
• Startups should learn from past hype cycles to make informed decisions about what to work on.
• Competing head-on with Google by building a better search engine was not a successful approach.
• Vertical search engines, such as a better Google for real estate, had some success.

Specialized Services (00:19:15)

• Vertical search engines like Redfin and Zillow have access to specialized data and monetize through services related to their niche.
• Redfin's success demonstrates the effectiveness of vertical search engines in influencing consumer behavior and decision-making.
• Vertical search engines don't necessarily need superior technology to succeed; they can thrive by focusing on specific verticals and providing additional services.
• Bundling software can be a successful strategy, as demonstrated by Microsoft's dominance over Netscape.
• Enterprises often prefer comprehensive solutions from a single vendor rather than multiple disparate solutions.
• Dropbox faced significant challenges when news of Google Drive leaked, highlighting the competitive advantage of established tech giants with vast resources.

GPT-4o and Desktop App (00:22:14)

• OpenAI released GPT-4o, a multimodal LLM, and the first version of a desktop app.
• The desktop app currently functions as a web experience but hints at future developments.
• LLMs on the desktop have access to all files, applications, IDEs, browsers, and can perform transactions, resembling a true personal assistant.
• OpenAI aims to capture the public's imagination with a general-purpose AI system that understands user intent and performs tasks.
• Competing with OpenAI in this area is challenging, similar to competing with Google on search.
• OpenAI's goal is to create products used by billions of people, making it difficult for startups to succeed in similar areas.
• Google's dominance in adtech and vertical search due to strategic importance.
• Startups should avoid areas where OpenAI's future releases are easily predictable.

Valuable Products (00:25:15)

• Perplexity AI excels at research and finding specific information but lacks creativity compared to ChatGPT.
• Startups should focus on valuable but unsexy AI tools, such as B2B solutions or niche applications, which big companies may overlook.
• The potential of AI agent-type apps extends beyond popular ones like ChatGPT, and there's room for multiple successful players in the market.
• B2B AI startups have significant potential due to the human aspect of sales and the need for detailed software to handle complex scenarios.
• Permit Flow, a successful B2B AI startup, expedites the construction permit application process.
• Advanced AI models are driving the creation of better startups.
• The GPT store may expand into B2B, introducing a charging mechanism for its use.
• B2B AI applications have proven successful in fintech, particularly in KYC and compliance tasks for banks.
• AI can enhance mundane tasks, enabling individuals to accomplish the work of many.

Better Business Models (00:30:59)

• Better AI models lead to improved software functionality.
• Startups can charge more for additional features and functionality enabled by better AI models.
• Revenue growth can be significant, as seen in YC startups that increased revenue from $6 million to over $30 million within a few months.
• The market opportunity for AI-powered automation is vast, potentially larger than the entire SaaS industry.
• There is a need for more founders to explore this area given the significant revenue potential.
• Startups should be concerned about competitors using AI models, not just OpenAI or Google.
• The key to success is building the best product with the right nuances and details on top of these models.
• Opportunities exist for consumer AI companies, particularly in the area of assistance and productivity tools.

Consumer AI Opportunities (00:33:58)

• Edgy AI applications, such as those involving legal or PR risks, present opportunities for startups.
• OpenAI's success with edgy AI models, like image diffusion models, highlights the potential for startups to capitalize on areas that incumbents may avoid.
• Examples of edgy AI applications include Replica AI's AI boyfriend/girlfriend model and Character AI's highly engaging virtual entities.
• Deepfake technology, as seen in Infinity AI's movie-making platform, offers edgy possibilities but faces potential legal challenges.
• The balance between edgy content and legal/ethical considerations creates opportunities for innovative startups.
• A Twitter user, Sandip, asks about specific updates from OpenAI, Google, and Meta that excite the speakers.

Emotional Depth and Translation (00:37:26)

• OpenAI's text-to-speech model exhibits emotional depth, making it sound more human-like compared to existing models.
• The live translator demo has the potential to break language barriers and facilitate communication globally.

Outro (00:40:47)

• The speaker expresses excitement about the potential of new tech product releases and looks forward to seeing what users create with these advancements.