Despite the widespread adoption of large language models like ChatGPT, most consumer AI startups are struggling to find lasting success, primarily generating revenue by selling to businesses rather than individual users. This challenge was a central topic at a recent TechCrunch StrictlyVC event, where prominent venture capitalists Chi-Hua Chien, co-founder and managing partner at Goodwater Capital, and Elizabeth Weil, founder and partner at Scribble Ventures, discussed why specialized consumer generative AI applications have yet to resonate with the broader market.
Chien highlighted the rapid obsolescence faced by many early consumer AI applications. “A lot of early AI applications around video, audio, and photo were super cool,” he noted. However, the emergence of powerful open-source models like Sora and Nano Banana, alongside offerings from Chinese developers, quickly eroded these opportunities. He drew a parallel to the iPhone’s early days, where a popular third-party flashlight app was soon rendered obsolete when Apple integrated the feature directly into iOS.
For lasting consumer AI products to emerge, Chien argued that AI platforms require a period of “stabilization,” much like the smartphone ecosystem did. He compared the current AI landscape to the 2009-2010 mobile era, a period that saw the birth of massive mobile-first consumer businesses such as Uber and Airbnb. Chien suggested that Google’s Gemini reaching technological parity with ChatGPT could be an early sign of this much-needed platform stabilization. Weil echoed this sentiment, describing the current state of consumer AI applications as an “awkward teenage middle ground.”
A significant barrier to the growth of consumer AI, according to both VCs, might be the smartphone itself. Chien questioned the long-term viability of a device that users pick up hundreds of times a day but “only sees 3% to 5% of what you see” for fully leveraging AI’s capabilities. Weil agreed, demonstrating her iPhone and stating, “I don’t think we’re going to be building for this in five years,” emphasizing the smartphone’s limitations, particularly its lack of ambient interaction.
This limitation has fueled a race among startups and tech giants to develop a new personal device capable of supplanting the smartphone. Rumors suggest OpenAI and former Apple design chief Jonny Ive are collaborating on a “screenless,” pocket-sized AI device. Meta has introduced Ray-Ban smart glasses controlled by a wristband. Meanwhile, numerous startups have attempted, often with disappointing results, to launch AI-powered pins, pendants, or rings that offer a different interaction model than smartphones.
However, not all impactful consumer AI products will necessarily depend on new hardware. Chien proposed a personalized AI financial advisor tailored to individual needs as one such offering. Similarly, Weil anticipates the ubiquity of an “always-on” personalized tutor, delivering specialized guidance directly through a smartphone.
Despite their excitement for AI’s potential, both Weil and Chien expressed skepticism regarding the emergence of several stealthy AI-powered social network startups. Chien voiced concerns about these platforms, which reportedly involve thousands of AI bots interacting with user content. “It turns social into a single-player game. I’m not sure that it works,” he remarked, emphasizing that “the reason that people enjoy social networking is the understanding that there are real humans on the other side.”
