Silicon Valley visionaries dream of making mega-money out of cool, futuristic products that thrill consumers, such as the metaverse, self-driving cars or health-monitoring apps. The duller reality is that most venture capitalists generate the best returns from investing in boring stuff sold to other businesses.
Over the past two decades, Software-as-a-Service has emerged as one of the most lucrative fields for VC investment, generating 337 unicorns, or tech start-ups valued at more than $1bn. But typical SaaS businesses, such as customer relationship management systems, payments processing platforms and collaborative design tools, rarely quicken the consumer’s pulse. Investors love them all the same: they are capital-light and speedily scalable and can generate torrents of revenue from dependable, and often price insensitive, corporate licences.
That may well be the case with generative artificial intelligence, too. For the moment, consumers are still dazzled by the seemingly magical ability of foundation models to generate reams of plausible text, video and music and to clone voices and images. The big AI companies are also trumpeting the value of consumer-facing personal digital agents that are supposedly going to make all our lives easier.