AI Mad Tea Party at SF Tech Week 2023 | AI Startup Moats, Microsoft, M12 & AI Agents | DVC

my wife Marina and I run DVC which is a collective VC firm so we are like a standard VC firm but we only have private individuals as our LPS and there are 99 of them most of them are Engineers most of them are doing AI so naturally we are looking at a lot of machine learning technology we've been doing this since 2012 so not new as I've heard like there are only three things that are happening faster than the speed of light the first one is the time between like the street light going green and you're hearing a hunk from behind in San Francisco and the second one is experts in everything becoming AI experts so this is also faster than the speed of light so welcome to AI mad Tea Party we are here citing quoting Lewis Carroll and the quote goes as it takes all of the running in the world to just stay in one place and if you actually want to get somewhere you got to be running twice as fast and this is exactly how it feels currently in the AI startup scene and please welcome together with me at this panel we have Michael Stewart partner at M12 M12 is Microsoft's VC arm and naturally they're investing in a lot of awesome AI technology I looked at their portfolio I'm jealous we have Ted Sammy senior director of cloud and AI Microsoft hi Ted and give it up to Jessica Greenwald founder of onam games and pixel kit so and since we're here wearing fun hats I I just wanted to remind you of the book like when Alice comes to the Tea Party the Mad Hatter and the hair are having a party and they like every time

they talk they have to switch places so I just I suggest doing just just once so let's let's maybe switch places and okay okay so Ted you are now the moderator no I I I won't make make that happen to you I'll take the blame for this panel being boring because we don't want it to be boring we actually wanted to be relatively short so this is only going to last like 20 30 minutes and then you can talk to each other I mean so just for you to basically we've been looking through the list of attendees and you made the cut from 1500 applicants so welcome I was pretty pretty crazy so most of the people here most of you are AI Founders then the second biggest cohort are angels and VCS investing in AI startups we made sure that VCS who write that their VCS have actually at least 10 companies in their portfolio and that startups present here have raised at least a seed round yes we're cruel to people who are not well funded so we're all looking at what you guys I'll just start with with Microsoft is address the the elephant in the room so Ted everybody I talked to says Microsoft just gonna make all of the money in the world maybe open AI will will be second but how do we compete with Microsoft when technology is no longer remote and when you guys own all of the distribution channels and all of the relationships with Enterprise customers in the world I'll just pass the mic to you yeah I mean I I think there's certainly a lot of exciting technology out there and Technology can be a strong advantage in Microsoft Technology at Microsoft has been

phenomenal they're moving at an incredible pace and OpenAI's models have been broadly recognized as impressive and world changing it's a bit of a banal answer but I think it's probably the case for many scenarios that starts one have in agility that larger companies don't have to respond to Market respond to customer needs they also the opportunity to eventually pursue things that maybe appear Niche and those are actually great footholds of larger deeper relationships when Microsoft and larger companies look at problems they need things that are going to move the needle for them and as they these companies get bigger and bigger they need bigger projects to fund against and so those are great opportunities for new entrepreneurs a new startup to Germany so if you guys are looking to build automation for Kebab kiosks south of Market Street that's going to be your Niche from now on everything else is owned by Microsoft and I just wanted to to talk maybe a little bit about startups and strategies of so going Niche is is an obvious response or the only response that startups have but startups are going to be competing for customers and marketing is changing like how do you navigate this as a startup I said you want to take it yeah so on my day-to-day my job is to help Fortune 500s stay relevant and what we're finding is most useful for them and for emerging Brands is competing on culture so creating this community or speaking to a niche and building from there really connecting with people on a emotional level because then it's harder once it's kind of like the cost of changing relationships is harder than it is for changing some forms of technology if you think about

it so if you can connect to people on this deeper relationship level where it's you as a consumer having a relationship with that brand that you're even part of it you're part of the the idea generation of helping that brand come up with new things that are relevant to you and people like you then the switching costs is really high for you because it becomes part of your identity I tend to and and I also see this happening outside of the companies that I advise tend to see organizations like Fortune 500s or major brands that that are Legacy brands that have stood the test of time focusing on building super Niche communities and growing that niche of cultural power from that super energized hardcore group of super fans yeah actually I want to resonate with that too because at this time when we're trying to interact with AI in new ways this is people discovering connection to Advanced AI other it's it's generating text based on their prompts or creating images that Delight them this is a chance to totally refresh your your interface with computers and you know to your point many of the assumptions about what the interface looks like or what what the requirements for setting up an account or doing Commerce look like can be assisted by Ai and I think that's really one of the most exciting things that's going on right now is like a total shattering of these preconceived notions of like what is the interface with the computer what is the operating system what is required to know how to use a computer before you can access Ai and startups are the best at completely going out there and exploring this and innovating there so I think

it's going to be very exciting to see you know what what you guys come up with to Delight people get them using AI more and then instruct the rest of the you know AI developer space like this is how it's going to be to that point in my experience people are even less patient with technical tools than they used to be and are getting even more impatient as time goes on so I see AI being used as a tool to help people use technology less or have to think about it less cool and while you were answering this I actually asked this question to chat GPT and this is what I'm not going to do it to you guys this is the cringiest thing ever please if you ever run a panel never do this so my my next question is is that the I was just listening to a founder of hme an idea of a self-driving Enterprise because if you can build an agent that automates one person and builds basically a virtual employee who can automate its manager and then you can automate its manager's manager or basically build brings us to the concept of one person maybe a team of like two three people a family running like a global Corporation and my question here is as you as as an as businessmen what do you think about this future do you do you embrace it do you like the idea of it I was just talking organizations I work with we keep losing copywriters and creatives which is not the vision that creatives were sold earlier we were told that all the jobs that would get cut are the super easy to automate technical thinking jobs but it turns out

creatives are getting cut left and right the people who are left there's the experience of being that person in organization too there's a reason that you're motivated to come to collaborate and work together on something and if you keep losing people to work with it becomes less motivating and you're also losing the experience of getting an outsider's perspective if it's just you and an echo chamber collaborating with the AI that is potentially been hyper optimized to whatever purpose it is that you're using it for at that time so I think that there will be a point at which employees speak up and say like hey actually this is not the this is not the experience that I want to have I don't necessarily want to be in charge of everything imagine the water cooler talk oh yeah that's awful yeah two Robertson in person yeah that's that's my two cents on that I I think that's a really sad world and this is someone when this coming from someone who would generally classify herself as anti-social I've I am not the level of anti-social where I only want to talk to a machine and never see any human beings yeah I mean you mentioned agents so we are starting to see the first startup embodiments of what an agent could be and it's it's kind of interesting because this is very very much a recent technical phenomenon you know in terms of demonstrating this in open source and projects like Auto-GPT and BabyAGI this idea of the human being becoming a manager of the machine so I am giving just the most Elemental the most basic instructions to a computer to to Fan out and do a couple of requests simultaneously keep at

it until they're done this is like at the idea phase it make it makes sense to us but what's really fascinating is to see some early startups meld this with a go to market idea with a business idea that is really groundbreaking but I think there's going to be a couple of waves of trust building that have to happen first you're going to need to First Trust the AI skills so I think those of us in the technical world who might be really leaning into AI probably all of you here in this room you're either investing or building a AI you don't need too much much help to trust the efficiency of an AI request of a skill how much have you integrated this into your everyday life is also again in this room you're probably way ahead of the Curve to make that future of agent something big it's that level of trust first the AI skill the request gets you the answer or gets you the result that you want then I can start trusting a machine or an agent to do many of these things at once in a very high level instruction and just say like keep at it till it's done I think that's really where it gets exciting but we're starting to just see the first inklings of this as a business now so with the Advent of this technology that is actually I'm very excited for and all of the automated agents replacing humans I hope they start with Social Security Administration and DMV personally but what are you guys most excited about like in 2023 what are you like what kind of startups what kind of Technologies you're looking for what makes your heart beat faster I

think what's most exciting for me is that there's a bunch of awesome Services out there that are also very expensive and through some of these technologies that can make them available I met with one startup that was trying to you know add llms to the college Consulting business so if you're an affluent person you can hire someone give them a lot of money and help you get into a great school and that can be a launching pad for you but for many that's not a cost it's not feasible I think there's a range of services like that are that are cost prohibitive and we can make those addressable like we expand the addressable audiences for those services and add some efficiency and scale to them which unlocks a lot of like flattening of the curve and enabling a lot of people to do a lot of things they weren't able to do before so is there that range of that Services Tech enabled Services space where they're just Services businesses today is really compelling in terms of like what's really exciting I actually want to just pick on that comment you made about the DMV because one thing we noticed when we first started surveying the space in terms of like where the AI applications were appearing what kind of engine Industries what kind of skills what kind of markets it was really everything that's that's how you wind up with like 5 000 startups in a couple of months and really I think that tells you two things one is everybody sees some usefulness for this right so it's there's going to be you know there will be these application specific AIS of course but I'd say the advice to you is find those

DMVs find those unhappy people because AI probably has a solution for them that's one of the ways I would kind of flip the script on going after the customers that already have a high degree of automation already and probably have built AI into their applications as it is use take advantage of this giant leap and ease of use and problem solving ability and again make those unhappy users happier do you remember Microsoft Bob no does anyone know what Microsoft Bob is oh my God oh thank you it's the origin of clippy people come on there's it was like this really weird operating system where you make a house and you get a little character like clippy for example and the character would tell you all these things you mine was usually like a cute little parrot I the thing I'm excited about is that cute little animal robot creature following you around and helping you out through life that is super exciting I'm looking forward to that too I I hope I hope my wife does now replace me with some fun animal that is that is good at writing texts and that is already happening like my job as a husband is on the verge of being replaced well I gave you guys a promise that we're going to keep it short and like we don't want to go boring I know these people can tell you lots of awesome things and like their brain is so big it barely fits in the huge house and your hat is way too small for your brain so guys please talk to each other talk to the panelists they are not running away from here I'm making sure that and thank you so much for being

such a good audience thank you