In a recent New York Times article, “Investors Pour $27.1 Billion Into AI Start-Ups, Defying a Downturn,” I had the opportunity to share insights on the extraordinary growth and challenges that AI start-ups are facing. The article highlighted the rapid influx of funding into AI firms, which attracted nearly half of all U.S. start-up investment from April to June 2024.

I’ve been working with a LOT of AI companies. A LOT! So that gives me a ton of data, and conversations with founders, to come up with some insights.

I was able to analyze 125 AI start-ups and found that they’re spending over 22% of their budgets on computing costs—more than double that of non-AI software companies. This capital-intensive reality helps explain why venture capitalists are throwing massive investments into AI, as I mentioned: “They clearly need the money.”

While the hype surrounding AI continues to grow, these companies will need sustained financial backing to handle the significant computing demands. I think we are going to see a split between the really capital intensive AI companies, and others that end up using smaller models, or other companies’ models, and try to build a business with less capital.

I recently shared some thoughts in The Information‘s article, “How Long Can OpenAI’s First Mover Advantage Last?” The piece explores the rapid adoption of OpenAI among startups and raises the question of how long the company can maintain its competitive edge in an evolving AI landscape.

At Kruze, we’ve seen first-hand how quickly OpenAI has been integrated into the startup ecosystem. By October 2023, 57% of our clients were paying for OpenAI services, a rate of adoption that’s unprecedented. Startups are using AI for everything from marketing copy and Excel modeling to data processing and even training their own custom AI models. Check out our data on how startups are using AI.

However, from what I’m observing, it’s unlikely that startups will remain reliant on a single AI model for long. Many are already switching between different models with surprising ease. I believe that, moving forward, startups will leverage multiple AI models based on three key factors: cost, effectiveness for specific applications, and speed.

In the end, it’s going to come down to which tool provides the best results for each unique task. Startups are constantly balancing efficiency with expenses, and I think we’ll see companies become increasingly agile in swapping between AI models to optimize for these variables. The AI landscape is rapidly evolving, and while OpenAI’s adoption has been nothing short of impressive, its lead is far from guaranteed.

For the full story, check out the article on The Information.

Once again, Kruze published our annual startup CEO salary study – this is one of the most impactful press campaigns that I’ve ever done. We have published this data since 2018, and I’m really proud of how well it does, both in terms of helping our founders and in terms of how much press (and SEO traffic) that we get from it. One of the publications that covered it this year was Inc.

I’ve been doing more and more of my writing on Quora, so this blog continues to lag. Here are a few of the most recent/highest read answers that I’ve posted on Quora:

Where can I find examples of investment deal memos written by venture capitalists? I write up an example VC investment memo, including the market opportunity, sales strategy and more.

Healy Jones’s answer to Would you make your company aware if you saw that they accidentally paid you twice your usual paycheck, or keep it a secret? Turns out I thought that I had this situation, and when I brought it up the result was more humorous than anything else!

Healy Jones’s answer to How can being a capital efficient startup help with its exit? My main point: the more the startup raises, the bigger the exit has to be to satisfy the VCs.

I think people are a little too harsh on Box’s prospects; I tweeted out this link the other day:  “buff.ly/1o70OxS Analyst: Box’s Only Realistic Option Is To Sell”

I realize that the company is burning a lot of cash to get new customers, investing something like $1.3 per each $1 in new revenue – but Box is a SaaS business and that dollar in revenue should come back the next year, and the next, and the next… Even if there is some churn, the NPV is likely to be highly positive.

Furthermore, Box has been aggressively investing in growth. If the company decided to grow more slowly and focus on profitability, I’m willing to be they could quickly start generating cash (or at least get to break even).

I realize the IPO window is closing, unless the markets to a big turn around. If not, we’ll get to see what Box decides to do – keep spending big bucks to grow the top-line, or slow down and get profitable. Either way, I’m not too freaked out about their future. Worst case, won’t someone acquire them?

 

Has been on the hilariously offensive US Airways tweet.

So funny: RT @nycjim: @Mashable has compiled the 38 best Twitter reactions to the NSFW @Usair tweet http://buff.ly/P19fhz

What does that say about the people that follow me on Twitter?

Who knows, but if you want to find me, Healy Jones, on twitter, my handle is @healyhoops.

personal stuff goes here.