What Neeva's quiet exit tells us about the future of AI startups

https://www.supervised.news/p/what-neevas-quiet-exit-tells-us-about

by bobvanluijt • 3 years ago

121 89 3 years ago

supervised.news

fxtentacle• 3 years ago

I believe that Google Memo answered this entire line of questioning very well:

https://www.semianalysis.com/p/google-we-have-no-moat-and-ne...

"We Have No Moat, And Neither Does *"

The problem with building AI products is that as long as you don't know why or how it works, your competition can just imitate the surface-visible results and it's as good as your product because they also have no clue about why or how it works, just like you.

13years• 3 years ago

Indeed. I have termed this the coming "AI clone wars".

"Anything you create can be created without investment cost while also being unique in design as well as delivering the same function or experience"

From - https://dakara.substack.com/p/ai-and-the-end-to-all-things

Apocryphon• 3 years ago

The droids are clones, delicious

throwaway559052• 3 years ago

We've got to stop calling this a "Google Memo." That's a false narrative. It's just a random doc written by one of 140000+ employees.

Google has been contacted for comment but it is understood that the document is not an official company memo. [1]

There are moats to products, but less so to pure language models trained on the same web-scale scraped data that many share.

Not all data is readily available to language models, and integration can be difficult.

A company that specializes in say AI for trash sorting likely still has a moat.

Microsoft integrating AI into Windows still has a moat (for Windows).

GPT-4 is ~200 Elo better than the next best semi-public Vicuna-13B in Chatbot Arena [2]. That is a non-zero moat - perhaps due to hosting larger models, training data, licensing, output postprocessing, etc.

[1] https://www.theguardian.com/technology/2023/may/05/google-en...

[2] https://lmsys.org/blog/2023-05-25-leaderboard/

dragonwriter2• 3 years ago

GPT-4 is ~200 Elo better than the next best semi-public Vicuna-13B in Chatbot Arena [2]. That is a non-zero moat

Its a non-zero advantage.

A moat is something that inhibits someone from closing an advantage.

(Also, its odd that the biggest models, outside of the big vendor centralized ones, they are testing are 13B-14B when 30B-ish and 65B-ish versions exist.)

hiddencost2• 3 years ago

(250,000 employees. Just about half of staff is TVC)

Jenk• 3 years ago

We've got to stop calling this a "Google Memo." That's a false narrative. It's just a random doc written by one of 140000+ employees.

So it's a.. memorandum?

kodah• 3 years ago

It is a memo written by a Googler on internal systems that makes it a Google memo. Companies almost never officially sponsor internal memos escaping without PR and legal having a crack at the content.

What I'm really curious about is why you think this isn't a Google Memo, and why you think that's a false narrative.

JoeAltmaier• 3 years ago

Not random. A 'researcher at Google'.

moneywoes3• 3 years ago

A company that specializes in say AI for trash sorting likely still has a moat

Is the most the trash data

mediaman• 3 years ago

I believe there is better opportunity from focusing hard on specific niche industry verticals and developing AI assisted workflows that make their operations more efficient.

Those will be good businesses, and founders will do well, though they may not be billion dollar businesses. Their moat will be industry comprehension and then their integration and embedding into business operations.

That does leave a question as to the purpose of VC in AI though.

goatlover• 3 years ago

100 million users for ChatGPT plus GPT4 with plugins seems like a pretty good starting moat.

dragonwriter2• 3 years ago

Is it though? It would be a moat for social media or something with network externalities, but Chatbot’s don’t have the strong network externalities that come when the business involves many-to-many user-user interaction patterns, or even 1-1 interaction.

Its a lead, but its not a barrier to competitors acquiring users even if they can offer better value for price outside of network size, nor is it a barrier to competitors development.

kuratkull• 3 years ago

That's not a moat. That's their current situation they achieved by being the first mover. But nothing is stopping someone else from doing a cheaper/better model tomorrow, next year, whenever. I'd jump ship in a few hours to a day from their Premium if something better or same-but-cheaper came out.

bagels• 3 years ago

If someone offered the same thing with better privacy for business use, I'd use it.

kortilla• 3 years ago

That’s not a moat, that’s a head start. Unless there is a network effect or good feedback from the users to improve the model, it’s not a moat.

legendofbrando2• 3 years ago

The fact that anyone at Google wrote this memo tells you more about Google than it does about AI (or anything).

What’s the moat for Apple (after all, they’re all phones and computers)?

What’s the moat for Microsoft (after all Google and insert thousands of other competitors offer docs, sheets, etc)?

What’s the moat for Facebook (after all, it’s just a social network)?

What’s the moat for Google search (it’s just another search box)?

The moat isn’t the product, it’s the business. Every one of these companies built a business that served customers well (people who want the best phone, company IT departments, advertisers, and advertisers again). The moat is a business so good at serving its customers that you can afford to offer a better/cheaper/faster product than others because you serve a well paying customer the best. Done well, your moat is then the momentum of being the default option.

romeros• 3 years ago

moat is real. And it definitely is the product.

Long time back when Google first came about.. I remember reflexively switching from the default Yahoo browser to Google. It felt painful even trying out Yahoo Search Engine... I was just a kid back then and even I wondered why I was doing this.. Google's Page Rank algorithm was simply superior..

Paypal's moat was being able to handle cyber criminals/hacking.. their competitors were getting wiped out because they were losing millions of dollars due to attacks and they did not have the technical know how..

pg's viaweb's moat was being able to rapidly add features because pg grokked lisp pretty hard at that time..

Google search results were far superior.

Same thing with Apple.. I never had a mac/iphone crash on me ever.. they just worked..

For Facebook.. the killer feature was the wall.. that and the network effects..

CPLX• 3 years ago

It’s monopoly and anti-competitive business practices all the way down. That’s Google’s moat and has been for a decade.

Under any sane regulatory regime they never would have been allowed to get to this point but that didn’t happen.

The only problem here is they aren’t going to be able to replicate that for the next big tech shift.

The moat isn’t “the product” the only great product they had was the search engine and that doesn’t make any money. The moat came when they were allowed to use it to dominate markets in advertising, mobile, email platforms, and so on.

robotburrito• 3 years ago

That's OK. You are mostly only in it quick enough to make your quick buck and exit.

ma2rten• 3 years ago

https://arxiv.org/abs/2305.15717

ergocoder2• 3 years ago

That googler has no real world experience whatsoever.

Google owns several platforms used by billions. If that is not the moat, what is?

Google has moats. They just suck at executing. That is why they are not dying, still making more and more money, but looking like they are losing. That is the benefit of having moats.

pclmulqdq• 3 years ago

That memo was specifically about Bard, Google's AI chatbot, not about Google in general. Google has plenty of other moats (they tend to build products with synergistic effects), and not having a moat there was really freaky to Googlers.

At some point, AI people are going to learn that most AI capabilities are usually features, not products.

neximo64• 3 years ago

I don't know how this memo keeps coming up as an artefact. It is not written by an actual Executive at Google, who is far more aware of the moats and business at Google.

Anyone more than just a casual observer knows how far from the truth that it is.

cj2• 3 years ago

Maybe I haven’t drank enough coffee today, but what exactly is the takeaway here?

Unless I’m missing something this article is basically saying a failed startup that couldn’t find product market fit was acquired by a large company for its team and some of its tech.

Maybe I skimmed the article too quick, but this exact movie is one that has been playing for decades.

Edit: Side note, my personal opinion on AI is that companies with existing distribution and existing audiences will be the ones that succeed (e.g. Notion layering AI on top its widely used existing wiki platform). Succeeding by building pure tech with no pre-established audience will be very hard.

woah• 3 years ago

I'm not sure but another type of business that may succeed is one that uses AI to provide a product or service directly to consumers through a radically more efficient business process.

esafak• 3 years ago

Why? AI increases leverage, and makes it easier for entrants to provide value.

two_in_one3• 3 years ago

Succeeding by building pure tech with no pre-established audience will be very hard

But that's how "Open"AI and Hugging Face started, didn't they? So, it's possible. Not easy, and probably not single-handedly. I would say it's much harder then selling another game in app store.

cj2• 3 years ago

If Google announced a ChatGPT equivalent embedded in Google Docs, I think ChatGPT would lose a ton of users very quickly. The Microsoft partnership/investment is their saving grace.

I think it’s a bit early to declare either of them to be a long-term (commercial) success.

Edit: See Google Duet: https://workspace.google.com/blog/product-announcements/duet...

dvt• 3 years ago

Hugging Face is a niche business at best, and OpenAI is pure hype, no real substance. I know you'll find someone saying (maybe even in this thread) "I use ChatGPT daily to make my job 10x easier" but these anecdotes are dubious at best.

Imo, the real winners here will be Nvidia and Apple, which provide software/hardware coupling for these AI features. And most of these are features, not products. Midjourney is a rare example of a real product, but the quality of generative art if you don't include copyrighted art in the training set is pretty bad, so there's a lot of complications there.

hiddencost2• 3 years ago

Shridhar was SVP of Google Ads for a very long time. Him quitting to start a Google competitor without ads was ... Optics.

Tho Pragh somehow was in the process of eating him.

diego• 3 years ago

tl;dr: nothing we didn't know. Since the beginning of times, startups with lots of funding have failed for a number of reasons. AI is no different in that regard.

m0llusk• 3 years ago

If only there were something that might help us understand what we were getting into.

rvz• 3 years ago

There really isn't a moat with these so called 'AI startups' especially those with VC money and are still unprofitable whilst pumping their valuation by overusing AI buzzwords pretending to challenge Google.

Neeva was a solution in search of a problem and almost no one cared to pay to search for results worse than Google. Their situation was so expensive that it wasn't enough for Neeva to make any money to break even and cover their compute costs.

This is the entire race to zero, where Stability, Apple, Meta are already at the finish line with other open source AI models or on-device inference with consumer hardware already available. O̶p̶e̶n̶AI.com and other hosted AI services cannot compete against open source models or freely available models and that is why O̶p̶e̶n̶AI.com needed to cry to regulators to introduce AI licensing rules that benefit them over actual open source or freely available AI models; i.e regulatory capture.

I can see many of these lesser known 'AI startups' getting acquired or shutdown and the bigger companies in AI actually doing AI research still being around much longer. The big money in AI is unsurprisingly hardware and not the software. [0]

[0] https://news.ycombinator.com/item?id=35581777

nvrmnd• 3 years ago

Even if Neeva was free it still was compelling enough to unseat such a dominant incumbent. Especially since the search result quality is not obviously different to the consumer.

dinvlad4• 3 years ago

Somewhere down the line there will also be a very heavy crash when everyone becomes disillusioned with this hype-driven self-proclaimed "AI" revolution (if we can call it that..). Misleading the investors and regulators and manipulating the market. Silicon Valley being SV once again!

1270018080• 3 years ago

Web3 "influencers" pivoted quickly to AI. What's next?

dinvlad4• 3 years ago

Ikr? Tomorrow it’ll be the new shiny, with even less value and more hype!

rgoulter• 3 years ago

I think this unnecessarily dismisses 'AI' alongside 'Web3' just because a hype cycle has moved from one to the other.

I wouldn't put them in the same bucket, though.

Web3 had lots of jargon that made it inaccessible for outsiders; it's difficult to point to use cases most people could care about. Blockchain technologies aren't going to be all that useful for only one user.

With AI, it's easier to imagine cases where this can be useful (e.g. coding assistants), which don't suffer the same downsides.

mrtksn• 3 years ago

I think this will follow the innovation cycles curve, i.e. the hype will be followed by a crash, which will be followed by widespread adoption and complete transformation of the humanity.

I suspect that once the flashy headlines die off, people will realize that you can't be better than the competition using the same AI tools everybody uses and the idea of replacing humans with the latest flashy AI tool will be replaced with AI tools being the baseline. This will simply result in having the bottom of the barrel in all areas in human productivity to be replaced with the current average in a similar way that industrialisation brought even the worst of the industrial consumer products to the previous average and made those accessible to everyone.

So, even when the hype fades we will end up with much higher bar of expectations. This is going to be a transformation of the society similar to the industrial revolution.

dinvlad4• 3 years ago

I highly doubt it will lead to anything but more suffering for humanity. And we’ve got to understand that no new tech was invented here, they’re using the same principles and methods that have been used for the past 40-50 years, but just throwing more compute power and feeding more data to it. It’s a hollow promise, a "fake it till you make it” approach, and just another BS marketing, imho

That said, its ability to generate spam and divert income from hard-working people (based on ill conception they can be “replaced”) will probably be unprecedented.

code51• 3 years ago

Where we're going we don't need acquisitions.

nell• 3 years ago

Neeva jumped on the AI train after GPT3. The original plan was a privacy-focused Search. People don't pay for that stuff. I can't believe $millions was invested in that idea.

Personalized search - a search engine for all your content based on the data you've collected and visited and private would be something people might pay for.

nocoiner2• 3 years ago

But I do, however, know of a very large number of standing open offers among tech executives that are more than ready to try out a different kind of hardware than what Nvidia offers if a truly competitive one ever actually materializes.

I’ve read this sentence four times and I can’t figure out what it is saying. Is it missing a word or something, or am I missing a piece of my brain?

More generally, I guess I’m not the target audience for the upcoming paid version of this newsletter, because I can’t extract much meaning or particular insight from anything I’ve read here. Though it did make me feel a little foolish for not tossing a little money toward NVDA, say, six months ago when it should have been pretty darn obvious to me that they’re the ones selling the shovels in this particular gold rush.

jaggederest• 3 years ago

Translation from gibberish to english for you:

I am aware that there exist a large number of tech executives who would like to try out non-Nvidia hardware, if anyone makes non-Nvidia hardware that is truly competitive.

nocoiner2• 3 years ago

LOL. Thank you. Guess that’s why I’m not making the big bucks.

zmmmmm• 3 years ago

My question is whether what the AI startups are selling is fundamentally snake oil or not. Essentially they are all in some way pitching a story of applying what people see in ChatGPT in some way, but usually based on some in-house LLM, custom training or tuning etc, nearly always at vastly smaller scale.

Which all begs the question, how much of what people are seeing is result of the sheer incredible model sizes in ChatGPT - 170b parameters for 3.5 and people are saying it could be 100 trillion in ChatGPT4. If network sizes of that scale are fundamental to achieving the kind of results people are expecting then all of these startups are going to fail.

The most interesting discussion in the post to me is about nVidia. I am curious why, or how long, it will take for what happened with crypto to happen with Transformers - that is, why don't we have custom training hardware yet? Are we just too early? Or is it because the operation is fundamentally so memory intensive that the economics are totally different to crypto, where it's all about the computation and not about storing massive amounts of state?

If it's true that the fundamentals of this are such that custom silicon can't help, nVidia looks to be a huge winner. Who knows which of these AI startups are going to win, but they are all going to buy GPUs from nVidia (or rent them from the cloud). nVidia is going to be the arms dealer in the coming war.

ugh123• 3 years ago

but usually based on some in-house LLM, custom training or tuning etc, nearly always at vastly smaller scale

Many of them are much simpler than that: merely modifying/enhancing the prompt and managing the back-and-forth with an LLM and then structuring the output. There's lots of use-cases that you can achieve with just that, but easily copyable.

swellguy• 3 years ago

Neeva was TBTF. Had nothing to do with AI.

StopHammoTime• 3 years ago

This is the first I’m hearing about Neeva shuttering it’s search product and I’m a paid subscriber………

Ironically the Neeva AI features were the thing that made me stop using it after I’d been using it for about 3 months.

Oh well, further proof you can trust businesses to be anything except businesses if they haven’t proven themselves yet. Promises are empty until delivered.

55555• 3 years ago

After seeing the news of Neeva shutting down, it was interesting to listen to Sridhar Ramaswamy on the No Priors podcast just ~1 month prior, talking about how the company had found product market fit and their "Aha!" moment, etc, and just generally presenting the kind of incredibly positive image one expects a founder to relentlessly present. But I guess in reality things were extremely different. Always be skeptical when someone is "talking their book." They will always say things are great, regardless of the situation, and sometimes it's actually a clue that things are even worse, as that's why they're on a media tour instead of working. But hey, $150 million isn't the worst way to fail.

moneywoes3• 3 years ago

Have you found any founders or podcasts that are genuine?

nologic012• 3 years ago

Its quite likely that the AI hype (or more precisely the LLM hype) will deflate like the crypto hype even if for a different set of reasons.

People have been conditioned on expecting the next big thing, FOMO on trillion dollar companies, winner-takes-all etc. as if that is the new normal.

Its quite unlikely that things will play out this way again. The iphone moment or the google moment or the facebook moment will not keep giving "tech" moments.

Tech has both arrived and also bitten more than it can chew. Take for example the rise and fall of crypto. It may have degenerated into inane speculation but not before raising fear deep in the core of the financial system. This is was shutdown libra and prompted cbdc discussions.

Technically we have definetely turned a page in the last decade: algorithms and network protocols keep evolving.

But we have not found a new social equilibrium on how to adopt and deploy new business models. Privacy, sovereignty, power and control, regulation are now center stage.

Tech startups changing the world (for good or bad) does not look like the mode for this decade.

Established entities selling shovels will milk the trend for a while but it feels that the next decade will be decidedly different (mostly regulated corporate adoption rather than startupy).

viscanti• 3 years ago

People have been conditioned on expecting the next big thing, FOMO on trillion dollar companies, winner-takes-all etc. as if that is the new normal.

People have been FOMO investing since the start of investment opportunities. Tulip Mania was a famous bubble in the 1600s. Even when people mostly predict the future correctly, they can be too early like with the dot com bubble (the internet seems to mostly have worked out and arguably beyond the expectations of most of the dot com speculators). AI could very well bring major improvements to productivity at some point, but if it happens, will it be while current speculators can stay solvent or will they be too early in the same way dot com speculators were?

nologic012• 3 years ago

will it be while current speculators can stay solvent or will they be too early in the same way dot com speculators were?

I wouldn't want to hazard a guess.

Speculative tendency is a given as an underlying driver, though it can be modulated by the structure of financial instruments, markets, interest rates, taxation etc.

What is not a given is that FOMO will be continuously expressed every few years just so that a number of savvy intermediaries can keep banking on that collective defect.

Manias are also generational phenomena - people do get burned out. I do have a feeling that currently we have collectively "burned-out" from the promised tech disruption.

I may well be wrong and a powerful idea that is not subject to all the above caveats is now incubating somewhere in the long tail.

An interesting question is whether we will see it here on HN.

drumhead• 3 years ago

Too much capacity and not enough profit. Anyone who puts money into AI startups is going to find it very hard to compete with Open AI and Google. But reality has never stopped a gold rush before and it wont this time round.

What Neeva's quiet exit tells us about the future of AI startups

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