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Generative AI Applications
Overview
Generative AI refers to the use of advanced machine-learning techniques to create original content or output. The generative AI startup ecosystem took off in 2020, following the introduction of GPT-3—Open AI’s 175 billion-parameter large language model (LLM). Subsequently, since September 2022, ChatGPT has taken the world by storm, gaining 100 million users in just two months and becoming the fastest platform to do so.
At present, generative AI startups engage in the space in four broad ways: 1) By leveraging closed-source FMs from creators, including OpenAI (GPT-n series, DALL-E series, ChatGPT, Whisper), Google (Vertex AI, PaLM API), AI21 Labs (Jurassic-series), and Anthropic (Claude); 2) By developing in-house, proprietary AI models; 3) By deploying a combination of third-party models with in-house algorithms; and 4) By harnessing open-source models like EleutherAI’s GPT-J and GPT-Neo and others available through platforms like HuggingFace.
Generative AI has found widespread applications across various commercial domains. It is widely used to generate personalized marketing content and to enhance entertainment experiences, such as creating game characters, artwork, and music. It also powers natural language conversational chatbots, aids in product design, automates workflow, and facilitates personalized learning experiences, among other capabilities.
Industry Updates
Market Sizing
The Generative AI Applications market in the US could reach USD 5.6 billion–10.1 billion by 2028
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Use cases
Generative AI solutions are increasingly adopted across various industries, particularly the information technology and industrial sectors. This specifically includes the software subsegment under information technology and the professional services subsegment under industrials.
The most common use case is for developing content, particularly for marketing and sales purposes like ad creation, customer training, and customer assistance. Other prominent use cases include conversational content creation like chatbots to assist employees and customers.
We have identified key Generative AI use cases below:
Market Mapping
The GenAI applications space is currently dominated by text-generation startups divided into multi-turn and single-turn text-generation segments.
The startups in these two segments alone account for nearly half of the identified players in the industry.
Subsequently, over half of these companies are in pre-seed or seed stages, suggesting that product development is still in its initial stages. Early- and growth-stage companies account for a smaller share of the space, with companies like OpenAI, xAI, and Anthropic standing out for their in-house foundation models and chatbots.
Microsoft, Alphabet, NVIDIA, Amazon, Meta, and Apple are among the notable incumbents that have entered the market with in-house GenAI tools and/or investments.
Multi-turn text generation
Single-turn text generation
Image generation
Video generation
Audio generation
3D asset generation
The Disruptors
The multi-text generation segment that houses companies offering natural language chatbots for multiple applications has drawn significant investor interest. OpenAI leads this segment and the image generation segment as well. Other notable natural language chatbot developers include Anthropic and xAI. Additionally, startups in the space were heavily concentrated in the two text-generation segments, with players in the single-turn text-generation space focused primarily on content creation solutions.
Meanwhile, Runway and Synthesia are among the companies leading the video generation segment, while Inworld AI and ElevenLabs are prominent audio generation startups.
As of August 2024, all the identified startups in the GenAI space remain privately held. Several of these, including OpenAI, Anthropic, xAI, Synthesia, Runway, Mistral AI, and Inflection AI, have already achieved unicorn status.
Funding History
Competitive Analysis
Incumbents
Big Tech incumbents are primarily active in developing the foundation models underlying GenAI applications. These players have also developed products leveraging their own in-house generative AI. Alphabet's “Gemini,” Microsoft's “Copilot,” and Apple’s “Intelligence” chatbots are cases in point, serving as direct competitors in the multi-turn text-generation and image-generation segments. Other examples include NVIDIA’s text-to-3D tools, “Magic3D” and “ATT3D,” and Adobe’s Firefly image-generation and editing service.
In addition to in-house solutions, these industry leaders have actively sought to expand their presence in the GenAI Applications space by investing in or partnering with other GenAI startups and related companies. Microsoft stands out in this regard, with its significant investments and partnerships with OpenAI since 2019.
Notable Investors
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Overview
What is generative AI?
