Is ChatGPT all hype?

Everyone is talking about ChatGPT right now. But how much of it is hype versus actual business value? We spoke to Alex Pavlov, one of our investment partners in Europe to find out.

Alex, how are VCs thinking about ChatGPT?

Investors seeking companies in the generative AI space first need to understand what they are investing in. VCs will never find a generative AI model that can compete with Google or Microsoft’s Open AI. Why? Because no start-up has the computing power nor the billions of dollars that it will cost to improve on GPT-4. 

To that end, most “ChatGPT start-ups” will fail. This is because the product innovation is just a thin layer of application on top of OpenAI, and the solutions are unlikely to stand the test of time.

That’s why, for entrepreneurs, the goal should not be competition but innovation. Identify how the technology can make your business or product better. This could be by improving your customer and user experience, reducing your costs or improving your ability to upsell.

How do companies reap the benefits?

Companies will reap the rewards when they creatively imbed technology into their existing products to improve customer service and experiences.

Our portfolio company, Krisp, is a good example here.

It provides noise cancellation software for communication platforms, like Zoom, Google Meets and Teams. Leveraging ChatGPT, it launched a virtual meeting assistant which automatically summarizes a call’s key points and action items in meeting notes. Krisp is the first to do this with on-device transcription (as opposed to in the cloud) and it has ultimately improved both information security and user experience.

This is a great example of how ChatGPT is being used by tech companies to innovate and improve existing products. With the help of ChatGPT, Krisp is setting a new standard for virtual meeting productivity, and I think other companies will likely follow suit.

And what about the risks with ChatGPT?

These models are not appropriate for any industries that handle sensitive data or demand a near-faultless accuracy rate. 

Companies operating in healthcare, financial services or military, for example, cannot afford even a 1% fault rate. Combined this with the fact that ChatGPT can’t guarantee user anonymity, these industries can’t risk using the technology in its current form. It could open the door to numerous privacy and regulatory problems.

It’s also important to not to get swept up in the hype. Despite it taking the global AI market by storm, there is actually no reason to be amazed by ChatGPT. 

The technology is by no means a scientific breakthrough in computing or in understanding of the human mind. It just uses an immense amount of computational power, which can be uniquely devoted by the likes of Microsoft and the other big tech firms.

How will the tech develop over the next 10 years? 

Similar to the public cloud, we will see a dominance of a few small players for the infrastructure component of generative AI. Namely, Microsoft and Google will dominate here. Why? Simply, they have the computing power and are the only two currently pursuing it. 

In the next few years, we will see the complexity of generative AI models rapidly increase. This, in turn, will result in a slowdown in content innovation. Growth will stall. But the success stories will come from companies that embedded ChatGPT into their existing products to improve processes, customer experience and customer service.