Issues with AI Startups + Cash Burn with Casber Wang, Partner at Sapphire Ventures

AI startups face intense competition and high valuations, with many VC firms chasing similar opportunities

The market currently has 5-6 major foundation model players (OpenAI, Anthropic, etc.), making it challenging for new entrants

Real economic impact from AI is still emerging - while there are time savings and efficiency gains, broad financial impact may take 2+ years to materialize

Infrastructure and vertical applications are two key investment areas, with vertical apps showing promise in legal, engineering and other specific domains

Founder qualities remain critical - looking for entrepreneurs with:

• Long-term commitment
• Ability to attract top talent
• Prior domain expertise
• Grounded approach vs pure hype

AI is enabling efficiency gains of 10-40% in workflows, but challenges remain around:

• Scaling efficiently
• Managing cash burn
• Standing out in a crowded market
• Building sustainable differentiation

Success metrics still focus on traditional SaaS metrics like:

• Revenue per employee
• Customer acquisition costs
• Growth rate
• Unit economics

Current AI applications are creating most value in:

• Developer productivity
• Content creation/marketing
• Process automation
• Enterprise search

Long tail use cases for AI are emerging but need time to develop real economic value and prove business models

Market is very early in the AI journey (< 2 years since ChatGPT) and will take 5-10 years to fully mature