Understanding the Value of AI Applications in the New Innovation Cycle

Building the Platform Layer

Now, we’ve already seen some of the largest companies in the world go deep on LLMs (Large Language Models).  Microsoft is closely partnered with OpenAI and ChatGPT. Google is racing to catch up, recently releasing Bard to full access. Nvidia is well-positioned to benefit as well, with their chips recognized as world leaders in the ability to process the data loads necessary for LLMs to run at high speed.

The value that investors place on AI is clear in these companies' stock performance. Nvidia stock has more than tripled the first half of this year. Google has added nearly $400B in market cap since the start of 2023 while Microsoft’s market cap has grown by more than $700B.

It might be easy to look at those figures and think, “The AI investing race is already won.”  

In fact, that’s not the case at all. The fast development of the platform layer is exactly what we want to see as startup investors.

The AI Application Layer is Just Beginning

As we’ve seen in past innovation cycles, the highest value in this cycle will likely be found at the application layer. Think about how companies like Google, LinkedIn, and Facebook emerged as high-speed internet access became part of our daily lives. Or how new startups like Airbnb, Uber, and Slack were built on the platform layer of the smartphone.

With Generative AI and LLMs as the platform level of this third innovation cycle, applications building on top of that technology will become transformative to our daily lives. We’re already seeing new applications gain massive traction in certain sectors like Copy.ai, a copywriting tool for marketing and sales teams. The broader applications are still to be discovered.

Winners Are Still TBD

While the first players have entered the field, the winners at the application layer have not yet been determined. Remember, before there was Facebook, there was Myspace; and before there was Google, there was Yahoo!, Ask Jeeves, and Lycos. As investors, we’re not just looking for the first company at the scene, we’re looking for the right one.

Our goal in the coming months here at Republic will be finding the players emerging in the application layer and seeking out investments connected to the AI Innovation Cycle.

Finding Investments in the Next Cycle

We understand the potential impact and value of investing in transformative startups within the AI space. In fact, we’ve already seen AI come into play with startups raising through Republic.

Genesis Therapeutics is using the power of AI to speed drug discovery. Firefly Aerospace is tapping AI calculations to take us deeper into space, whereas companies like Maven are tapping AI to move towards a world of truly one-to-one education.

You can be certain we will continue to provide you with access to carefully vetted investment opportunities in AI connected fields, ensuring that you can be at the forefront of this exciting innovation cycle through the Republic Deal Room.

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