Two things dominated the VC world during the quarter:

1. Generative AI — a type of artificial intelligence that enables machines to generate new content, such as text, images, music or even code, that resembles human-created output; and
2. The aggressive tech layoffs and precipitous drop in VC activity across the globe which, though expected all along, its effects are only now becoming “real”

Generative AI

ChatGPT, the widely used Generative AI application, gained immense traction (see graph), prompting Google’s leadership to raise concerns about its potential impact on their $150 billion search revenues.

In Q1 2023, Generative AI solutions received £10.7 billion in investments, marking a 300% increase compared to the entire 2022. Microsoft’s £8 billion investment in OpenAI, the creator of ChatGPT, played a significant role in this growth, indicating the onset of a new cycle of hype. This resurgence brings back the VC dilemma of distinguishing between fleeting successes and long-lasting innovations.

To capitalise on the momentum and establish competitive advantages, founders are teaming up and repositioning their existing startups. For instance, Eiso Kant, CEO of Athenian, joined forces with Silicon Valley veteran Jason Warner to launch Poolside. We understand that Athenian’s shareholders will get rolled into the new company, which raised an additional £20 million. Poolside aims to develop the world’s leading foundation model for code generation.