AI App Startups Making Rapid Gains in Sales and Funding
Startups that build artificial intelligence (AI) applications on top of large language models (LLMs) are reportedly making rapid gains in both sales and funding.
These startups are reaching as much as $200 million in annual recurring revenue in less than two years and, as a group, increased the amount of funding they attracted by 110% to reach $8.2 billion in 2024, the Financial Times (FT) reported Monday (April 14), citing data from Dealroom.co and Flashpoint.
This category of AI startups includes companies like Perplexity, Synthesia, ElevenLabs, Harvey and Sierra, according to the report.
They also include coding app startups like Anysphere, Reflection AI, Poolside, Magic and Windsurf, formerly Codeium, that have raised hundreds of millions of dollars over the past year, per the report.
AI app startups are benefiting from soaring user numbers, competition among LLMs that is driving down the cost of using AI, the flexibility to switch from one AI model to another, and investors’ hopes that they will deliver productivity gains to customers without having to invest in building LLMs, the report said.
At the same time, some investors believe these companies face challenges, including their first annual renewal cycle with their customers and the possibility that larger companies could come along and offer similar applications, the report added.
It was reported in August that while generative AI is not yet making money in some fields, the technology has quickly proven its value in powering coding assistants.
The report said coding copilots have delivered clear time to value and value-add; at least one company said it would stop hiring people who code without AI; the demand for programming will go up as the task becomes easier; and software engineers have already integrated these assistants into their workflow.
Other AI applications and ways companies are harnessing LLMs include AI writing assistants, chatbots, virtual tutors and research aids, PYMNTS reported in May.
In addition, healthcare providers are exploring the use of LLMs for medical Q&A, doctor note summarization and drug discovery; banks are leveraging the models for risk assessment, fraud detection and personalized financial advice; and law firms use LLMs to assist with legal research, contract analysis and case prediction.
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