TLDR:
- Consumer tech startups have struggled to raise funds in recent years, with 2023 seeing a significant decline in investment.
- Investors are now looking to AI-powered consumer startups as a potential solution.
- AI-powered social content apps and prosumer tools are being touted as potential areas for growth.
Consumer tech startups have faced challenges in raising funds in recent years, with 2023 being particularly challenging. Direct-to-consumer companies, in particular, have been hit hard, with the implosion of SmileDirectClub and underperforming stocks for companies like Warby Parker and Allbirds. Other consumer categories, such as e-commerce and media/entertainment, have also struggled.
Investors are now pinning their hopes on AI-powered consumer startups to revive the industry. Some optimistic investors point to AI-powered social content apps as a potential area for growth. For example, Can of Soup, a social generative AI startup, received early-stage funding from Sequoia. Additionally, Character.AI, a chatbot startup, is in talks to raise millions from Google and other investors.
However, some investors believe that the hype around these AI-enabled consumer companies may be overblown. The market has become noisy with numerous “copy-cat” apps offering similar AI tools. Prosumer tools, on the other hand, are seen as a more promising niche. These tools help hobbyists and workers create professional assets without needing a large team. Generative AI startups, such as Leonardo.AI and Kittl, have received funding and are gaining traction in this space. Canva, an existing prosumer design company, has also added generative AI tools to its offerings.
Overall, while AI-powered consumer startups may offer some potential for growth, challenges remain in terms of market saturation and competition. Prosumer tools, however, are seen as a more exciting sector in the market.
