A Cautionary Tale of Consolidation

Even with such an explosive growth forecast for AI, it may still face a similar hype cycle trajectory as many other facets of tech do.
Just as with other innovative technologies, for AI, it’s likely that we will “go through a lot of innovation that is absolutely necessary… but then over time, the hype phase on the user side [fades] and those businesses don’t last.” This has happened in all facets of tech, from mobile to gaming to one of the most notable for tech investors, the dot-com bubble.
Beth cautions that you can “expect something similar to happen with AI as what we’ve seen in mobile, [and] maybe even at a higher rate.” For context, “a wave of innovation such as mobile will often put on the market 2 million apps, but in the long run, fast forward 10 years, most people use about 10 [apps].”
According to Crunchbase data, there are nearly 10,000 AI startups, while a more specific look in generative AI shows nearly 800 startups. Of that 800, 67% are still early stage, while only 2% are late stage. This comes despite a 5x surge in generative AI investments to almost $22 billion in 2023, with funding concentrated in OpenAI, Anthropic, and Inflection AI.
This sort of proliferation of companies creating different AI apps and use cases is definitely a positive outcome, but it’s extremely unlikely that all 10,000 companies participating in the AI economy survive, with consolidation occurring via acquisitions to even bankruptcies for the smaller bootstrapped startups.
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