In the ever-evolving landscape of artificial intelligence, a playful yet deeply insightful exercise has emerged: the AI Startup Fantasy Draft. Sp
In the ever-evolving landscape of artificial intelligence, a playful yet deeply insightful exercise has emerged: the AI Startup Fantasy Draft. Spearheaded by tech enthusiasts, investors, and industry insiders, this draft is more than a game—it’s a strategic projection of which AI companies could dominate the space in the coming years. In the latest episode of the Cerebral Valley Podcast, hosts Eric Newcomer, James Wilsterman, and Max Child delved into this engaging event, making difficult decisions on who to keep, drop, or pick up for their rosters. Here, we dissect their picks, strategy, and what it all means for the future of generative AI.
The Context: Recap of Last Year’s Draft
Before diving into this year’s choices, let’s revisit the structure of the previous draft. In 2024, the trio each selected five AI startups that had raised $100 million or more. Eric Newcomer had taken a major gamble by drafting OpenAI first, a move that came with a hefty $75 billion handicap. The participants’ selections reflected their calculated risks, with startups ranging from foundational model developers to specialized infrastructure and coding AI platforms. Here’s a snapshot of their 2024 rosters:
https://www.youtube.com/watch?v=YF-IwLpbHlg
Eric’s Picks:
- OpenAI
- Inflection
- Character.AI
- Glean
- Mistral AI
Max’s Picks:
- Databricks
- Pinecone
- Cohere
- Modular
- Imbue
James’s Picks:
- Hugging Face
- Anthropic
- AI21 Labs
- Replit
- Adept
As the year unfolded, some companies flourished while others saw their momentum wane. This dynamic led to tough decisions in the 2024 draft, including dropping underperformers and seizing new opportunities.
Drafting Strategy: Rules and Nuances
Understanding the strategy behind the AI Startup Fantasy Draft requires a look at the intricate rules that govern it:
- Eligibility Requirements: Startups must have raised over $100 million and have a core focus on generative AI or related infrastructure. Companies specializing purely in non-generative sectors, like healthcare or defense, are excluded.
- Scoring and Valuation: The aim isn’t to measure return on investment but to project the highest potential market cap by November 2028.
- Handicap Rule: To claim the first pick, a participant may need to take a handicap if their choice is deemed an “outlier” in terms of valuation.
With these rules in mind, the draft this year took an unexpected turn as the hosts made bold moves, dropping and adding startups in anticipation of future growth.
A Look at the 2024 AI Draft Picks
During the latest episode, Eric, Max, and James updated their rosters. The shifts revealed fascinating insights into where they believe the AI industry is headed. Here’s a breakdown of their decisions:
Eric’s New Additions
Eric’s draft strategy remained steadfast: pick high-value, high-upside companies. His focus was on big-name startups capable of redefining the industry landscape.
1. Perplexity AI
Eric’s first new pick was Perplexity AI, known for its innovative approach to AI-driven search and information synthesis. With reported revenues of $20 million ARR and its aim to challenge Google, Perplexity was a calculated risk that could yield massive returns.
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2. Safe Super Intelligence
The brainchild of OpenAI’s co-founder Ilya Sutskever, Safe Super Intelligence (SSI) caught Eric’s eye as a contender in the high-stakes race for AGI (Artificial General Intelligence). Given Sutskever’s reputation and the startup’s mission, SSI has the potential to be Israel’s answer to national AI models.
3. Codium and Harvey
Rounding out Eric’s roster were Codium, an AI-assisted coding platform, and Harvey, which focuses on revolutionizing legal work with AI. Both were strategic plays in the application sector of generative AI, promising to redefine their respective industries.
Max’s Strategy: Riding the Heat
Max leaned into high-valuation, high-visibility picks, banking on proven players to carry his roster.
1. Scale AI
Max’s choice of Scale AI, which had recently raised at a $14 billion valuation, was rooted in its prominent role in data labeling and infrastructure. While some critics argue that its business model is vulnerable to automation, its rapid growth and essential data services make it a reliable bet.
2. Sierra and Heia
Max tapped into the buzz around Sierra, a customer support AI company led by ex-Salesforce CEO Brett Taylor, and Heia, dubbed the “AI for Excel Jockeys.” These picks reflected a bet on niche, high-impact applications of AI in enterprise solutions.
James’s Picks: Diverse and Developer-Focused
James expanded his portfolio with a mix of foundational model players and developer tools.
1. XAI
James’s first choice was XAI, Elon Musk’s latest venture, rumored to be raising at a valuation of $40 billion. Despite its current positioning as the third-best model, Musk’s proven ability to push technological boundaries made XAI a standout pick.
2. Runway and 11 Labs
Runway, which made waves in AI video generation, and 11 Labs, renowned for its advanced text-to-speech technology, were added to James’s team for their product-market fit and innovative potential.
3. Poolside
Closing out James’s picks was Poolside, an AI-powered software development platform. With a recent $500 million Series B, it raised eyebrows as a player with both capital and ambition.
Drops and Surprises: The Tough Calls
Every draft comes with its share of difficult decisions. Here’s who didn’t make the cut this year and why:
1. Max’s Decision to Drop Pinecone and Imbue
Despite initial excitement, Pinecone and Imbue didn’t show the expected traction. Max’s sources hinted at operational challenges, leading him to drop these from his roster.
2. James’s Exit from AI21 Labs
AI21 Labs, known for its language model capabilities, couldn’t keep pace with stronger players in the open-source community. The strategic drop opened up space for newer, higher-potential picks.
Key Trends Observed in the Draft
Several themes emerged from this year’s draft, underscoring major trends in the AI landscape:
1. The Rise of National AI Models
The emergence of Safe Super Intelligence as a potential national AI for Israel highlights a trend where countries may begin investing in their foundational models to secure economic and strategic advantages.
2. Niche Applications Gaining Traction
From Heia’s AI-driven spreadsheet management to Harvey’s legal services, specialized applications of generative AI are proving lucrative. These startups signal a shift toward solving specific enterprise pain points.
3. The Persistent Dominance of OpenAI
Despite the high-profile new entrants, OpenAI still looms large. Eric’s team, backed by his first pick, underscored that OpenAI remains the industry’s barometer for innovation and growth.
Controversies and Counterpoints
Not all picks were met with unanimous approval. Perplexity AI faced skepticism from Max, who questioned its capacity to challenge Google effectively. He pointed to its relatively modest user base and monetization challenges.
Meanwhile, the inclusion of 11 Labs on James’s team drew mixed reactions. While its product has clear use cases, some viewed its voice synthesis capabilities as potentially replicable by larger players like AWS and Microsoft.
What Does This Mean for the AI Industry?
The 2024 AI Startup Fantasy Draft offers more than entertainment; it’s a reflection of industry dynamics, showcasing how investors weigh potential, hype, and tangible progress. With key players like Scale AI and Perplexity AI vying for leadership alongside national efforts like Safe Super Intelligence, the race is as unpredictable as ever.
As the podcast hosts noted, playing along at home offers valuable lessons in understanding market trends, assessing risk, and staying ahead of the curve. The coming years will reveal whether these strategic bets pay off or if unexpected disruptors will emerge from the shadows.
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