AI mania: the rise of a new "brain valley", unicorns were born overnight, and investors are trying to replicate the next OpenAI

Text: Juny Editor: VickyXiao

Image source: Generated by Unbounded AI tool

"Recently, for AI projects, our boss is now ordering that we would rather kill three thousand by mistake than let one go." Investor Lucas said to Silicon Star. In recent months, in order to get in touch with more cutting-edge technologies and excellent projects related to generative AI, he frequently travels between offices in China and the United States, and also supplements AI-related knowledge when he has a little spare time.

Technology companies roll up large models, and the investment circle has to follow suit. Since the emergence of ChatGPT, AI has been pulled into the frenzy zone from the investment winter. The tide of capital flowing to Web3 and Metaverse in the past few years has quickly turned around and flocked to artificial intelligence. After missing OpenAI, everyone is frantically looking for the next AI company that can change the world.

Under the current strong investment boom, in addition to major technology companies starting to All in AI, in Silicon Valley, young developers and startups in the field of generative AI have also begun to flock to Hayes in downtown San Francisco. In the Valley community, a new "Cerebral Valley" driven by AI is emerging.

Hot money pours in, AI start-up companies "grow wildly"

How popular is financing in the AI field?

According to statistics from the research company PitchBook, in 2018, when OpenAI first released the initial version of the GPT model, the total annual financing in the entire generative AI field was only 408 million U.S. dollars. After the release of ChatGPT last year, this figure in 2022 climbed to $4.5 billion. **And this year, in the first quarter alone, startups in the field of generative AI have announced about $11.6 billion in deal funding, involving 46 deals. **

Analysts predict that, on current trends, global investment in generative AI this year will easily be several times higher than last year.

Image via Picthbook

AI projects have become popular across the board. From past projects chasing funds to running, now everyone is chasing projects. Sometimes entrepreneurs can even attract investors to rush to spend money with just an unformed idea, and the project valuation skyrockets.

For example, Niki Parmar and Ashish Vaswani, two former Google AI researchers, previously co-authored a paper on Transformer's deep model architecture in 2017, which has caused considerable repercussions in the industry. And at the beginning of this year, when the investment institutions heard that they were leaving Google and wanting to start their own businesses, they all rushed to the door. **They received several investments without a business plan, without a clear product idea, or even a name for the company, and the company's valuation has reached 50 million US dollars. **

Another example is LangChain, an open source library of software developer tools, which completed a $10 million financing at a $50 million valuation without any revenue, and then only a few weeks later, Sequoia Capital led an investment of about $20 million. , so that the valuation of LangChain quadrupled to about 200 million US dollars.

Under the current investment winter, **generative AI has become a sudden and explosive financing sector, which not only attracts AI researchers to go to sea, but also entrepreneurs from other tracks. **

One of the obvious changes is that many former Web3 and metaverse believers began to turn to AI. The number of participants in various Web3 conferences that were in full swing last year has dropped sharply this year, and various discussion groups now seem to have seamlessly turned into AI groups.

"I'm going to start an AI-related product startup, and there are already investors who are willing to invest in us." An entrepreneur who previously started a metaverse startup and received millions of dollars in investment recently told Silicon Star. But when Silicon Star asked what kind of products to make, he said that he hadn't thought about it very clearly yet, but it must be in the direction of AI.

As for this sudden turn, he said that on the one hand, it is because Metaverse is too difficult to obtain financing, and the original product faces too many obstacles to further development; on the other hand, it is optimistic about the commercial application of AI technology in the next few years. , that the future development potential is greater.

"Now the expectation of AI is definitely stronger than that of Web3 and Metaverse. As far as I know, even if they don't completely switch to AI, everyone is now trying to find ways to combine existing products with AI."

Since the fourth quarter of last year, startups in the AI field have sprung up like mushrooms. According to Crunchbase statistics, in the past 6 months, the proportion of global AI start-up companies’ seed rounds and previous financing has reached about 70%. Many companies that have received investment are newly established, and their technologies and products have not yet been released or tested. **

The data comes from Crunchbase, drawn by Silicon Stars

Silicon Valley's new AI stronghold - "Cerebral Valley" (Cerebral Valley)

Investors are eager to bet on the next major technology in the field of AI, and entrepreneurs are hoping to become the next OpenAI. In Silicon Valley, this wave of AI investment and entrepreneurship is particularly fierce.

In recent months, there has been an excitement in the air at various gatherings, events and conferences about generative AI, big and small, in Silicon Valley, and it feels like a throwback to the startup boom of the early days of the mobile internet. . **The Hayes Valley (Hayes Valley), located in the center of San Francisco, has gradually become the area where young developers and entrepreneurs in the AI field gather most. **

As more and more AI hacker houses (hacker houses) appear in this area, more and more developers, entrepreneurs and investors and various AI activities and conferences have also begun to be placed in this area among. So in San Francisco's young AI tech community, people have recently dubbed Hayes Valley the Cerebral Valley. **

Picture taken from Google Maps

The hacker house has a history of more than ten years in Silicon Valley. To some extent, the hacker house is a continuation of the classic garage culture in Silicon Valley. Entrepreneurs gather in the "Hacker House", where they live and work together, exchange technologies, inspire inspiration and find like-minded partners, which in turn gave birth to many technologically innovative companies.

Nowadays, in various "hacker houses" in Hayes Valley, people's activities revolve around AI. Sharing sessions, exchange activities, and hackathons are all held in this small community, attracting more and more people. With the attention of more practitioners in the industry, investors are also actively looking for potential stocks in Hayes Valley.

For example, the venture capital firm NFX, which invests in several generative AI companies, recently equipped a secret bar with red walls in Hayes Valley, and transformed the garage of the place into an event space with a dance floor, inviting AI developers from time to time we party. Some investors believe that AI is a field that needs strong connections, and publicly stated that if you start an AI startup in San Francisco, especially in the Hayes Valley, you will have an excellent advantage.

Image from Twitter of Bloomberg Beta investor Amber Yang

In March of this year, an invitation-only AI summit was held in Hayes Valley for the first time under the name of Cerebral Valley. **On the list of participants, we can not only see some of the hottest entrepreneurs in the AI field such as Hugging face CEO, Runway CEO, Stability AI CEO, Anthropic Chairman, etc., but also a group of Sequoia, Founders Fund, etc. The figure of Silicon Valley's top venture capital. **More and more AI activities in the field have begun to use "Brain Valley" as the venue.

**Technology giant platform, the new AI unicorns are starting to "grab the site" **

Driven by both technology and capital, while entrepreneurs are pouring in, startups in the AI field are also growing rapidly.

According to CB insights data, **As of the end of last year, there were only six unicorns in the global generative AI field, including OpenAI, Hugging Face, Lightricks, Jasper, Glean, and Stability AI, but by the beginning of May this year, generative AI The number of unicorn companies has reached 13. **That is to say, in less than half a year, the number of generative AI unicorn companies has doubled.

**However, judging from the current geographical distribution of the 13 generative AI unicorns, Silicon Valley is still the most concentrated area despite strong global characteristics. **Except for Cohere headquartered in Toronto, Hugging face, Runway and Glean in New York, Lightricks in Israel, Jasper in Austin, Texas, and Stability AI in London, the remaining six are from Silicon Valley.

And behind these unicorns, many have giant figures. Among them, the well-known combination of Microsoft and OpenAI is well-known. In addition, technology giants such as Google, Amazon, and Apple are also taking rapid actions to expand their AI territories through self-research + investment.

List of Generative AI Unicorns as of May 8, 2023

For example, in addition to accelerating the development of its own PaLM model and chat robot Bard, Google has also continuously injected capital into OpenAI's biggest competitor, Anthropic, since this year. Just finished investing $300 million in February, and participated in Anthropic’s new round of financing of $450 million last week. Anthropic expects to raise up to $5 billion in funding over the next two years to advance its big language model, Claude, to compete with ChatGPT, according to an investor presentation reviewed by The Wall Street Journal.

Amazon is not idle here either, and is busy building a generative AI team and launching its own large language system Amazon Bedrock based on AWS. On the other hand, Amazon also cooperates with Hugging Face to build language models for Hugging Face on AWS such as ChatGPT and Bard. Competing product BLOOM offers a full range of support.

Although Apple has not been high-profile in AI investment recently, it is also quietly acquiring some AI startups. For example, in February this year, it bought WaveOne, an AI algorithm company located in California, and its products are currently working online in several of Apple's machine learning businesses. According to statistics, in the past few years, the number of AI startups Apple has acquired ranks first among technology giants.

In addition to technology giants, large investment funds such as Redshirt, A16Z, and Softbank are also betting on these leading AI start-ups, becoming their "gold masters" and talkers behind the scenes.

For these rising AI "upstarts", if they want to develop further, they have to face the fact that the cost of training large AI models is too high. **According to a recent report by research firm EpochAI, the average cost of training the various machine learning models that generative AI runs could grow to $500 million by 2030 due to the increasing amount of data on the internet.

But so far, most AI startups have not found a clear path to profitability. Compared with the huge operating costs, the income brought by existing products is just a drop in the bucket. ** Therefore, if these AI companies want to grow, they have to rely on a lot of funds and application support. From this perspective, the AI battle may eventually be a game among giants in the future. **

There is no denying that we are passing through a major technological inflection point. Generative AI is like a gold rush. With the help of capital, some great products and companies are gaining momentum in this wave.

But at the same time, just like many conceptual hypes in the past, the entry of a large number of start-up companies and funds is also violently disrupting the pool of AI commercial applications. Only after the big waves wash away the sand will we truly witness the birth of some AI giants.