How to Assess Early-Stage Startup Ideas in the Era of Generative AI Staff

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In today’s startup technology landscape, generative AI has emerged as a groundbreaking field with immense potential. With the latest LLMs, like GPT-4, the barriers to entry, especially for AI startups, have been drastically lowered, opening up new possibilities for entrepreneurs and investors.

However, amidst the excitement, and for the sake of long term value, its essential to operate judiciously and ensure startups are still grounded in strong business fundamentals, penned NFX General Partner Morgan Beller. Beller’s timely and insightful AI Startup Litmus Test piece attempts to serve as a beacon of guidance for both startup founders and investors in the era of generative AI.

The litmus test emphasizes the importance of considering AI as a tool rather than the centerpiece of a startup, and current available LLMs should be seen as a means to an end. It should support and enhance the core value proposition of the business. Beller encourages founders to assess whether their business would still be compelling and viable even without the AI component. Businesses should stand on their own merits and not solely on the AI hype.

In assessing startup idea feasibility, especially those relying on generative AI, Beller lists questions like: How often do you need to give your user the correct answer for the product to be viable?‘, ‘How long would it take for a user to do the same task as your core product, with ChatGPT+?‘, or ‘What are you building in your AI pipeline around calls to foundational models that you can patent?‘.

It concludes by highlighting the importance of infrastructure engineers as top-tier production ML experts, and that in this era, startups can grow and thrive with smaller teams than traditionally assumed.

NFX has made 18 investments in generative AI startups to date.

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