🤖 Consumer AI startups
🤖 Consumer AI startups
+ How AI is disrupting the B2C world
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A few days ago, I read a tweet about a new AI model called Action Transformer (ACT-1), launched by Adept AI. In simple terms, it’s a model trained to use digital tools. By reading some high-level user requests, ACT-1 can execute the tasks on a web browser, such as finding you a home on Redfin. It blew my mind.
There have been several other breakthroughs in AI, such as OpenAI’s new language models like GPT-3 and Dall-E. One main driver for this progress in AI lies in increasing corporate investments in AI. In 2021, companies globally invested $176B into AI, with a significant portion of those coming from private investments. By comparison, there were just around $5B in investments 8 years prior.
Despite all the new developments, the majority of the AI applications we see are still concentrated in the B2B world, specifically enterprise software. Out of the 10 newly minted unicorns in the AI space this year, all of them are B2B companies.
However, in the past couple of years, I have seen more and more AI companies disrupting B2C sectors as well. Besides the big ones like TikTok and Duolingo, many emerging consumer startups are leveraging deep learning and other AI technologies to deliver their core value prop.
For this post, I would love to share some of the interesting ones I have found. Let’s dive in!
1. Welcome
Unique insight: it’s hard to find cool, authentic experiences when you travel to a new city. When searching online, consumers mostly find results that are advertised placements.
Product: It’s like Tiktok meets Google Maps. Welcome is an AI-powered personalized travel guide that recommends experiences based on the user’s interests and the people they trust. When the user gets on the app, they can see a TikTok-like feed of videos about places around them and across the world (curated by Welcome’s street team), and the user can save them to a map for later. Over time, Welcome learns about the user’s interests based on their interactions in the app and makes more relevant recommendations in real time.
Traction: Welcome has acquired over 50K beta users across more than 350 cities globally. It has raised $4.2M to date from investors like Accel and Lakestar Ventures.
2. Lunchclub
Unique insight: Sometimes, a casual conversation can change a person’s life. The right introductions and meetings can lead to companies being started, new ways to think about ideas, and collaborations on new projects.
Product: Lunchclub started as an in-person, one-on-one coffee chat matchmaking platform and pivoted into a virtual networking platform that connects people to have conversations without borders. The magic behind Lunchclub is its machine learning-powered matching platform. The platform builds a comprehensive profile for each user by collecting information about their interests and goals and uses those information to match relevant people for a casual chat. After each match, it also collects feedback from each user, which serves as another piece of data for the AI to improve matching quality and precision in the future.
Traction: Launched in 2017 in the US, Lunchclub created 1M connections and grew 15x in 2020 alone according to Business Insider. It raised a $30M Series A at a $100M valuation from investors like Lightspeed, a16z, and Coatue.
3. Boomy
Unique Insight: The music industry hit a growth inflection point in 2016 due to the explosion of demand for streaming music. However, only people with resources and music education could benefit from this rapidly growing industry since music production tools can be expensive and turning ideas into tracks requires tons of skills. The Boomy team started the company with the goal of leveraging AI to democratize music creation for everyone.
Product: Boomy operates as a vertically integrated indie music label, powered by AI. Boomy users can come to the platform and use AI to generate songs by selecting different genres and styles they like. Based on the output, the user can either reject it or edit it themselves before publishing them to streaming platforms like Spotify. Users get to keep 80% of the streaming revenue their songs create and Boomy takes the rest.
Traction: Boomy is a seed-stage company that started in 2018. Boomy users have created more than 9 million songs, around 9.28% of the world's recorded music.
4. Finesse
Unique Insight: The fashion industry is an inefficient industry that has not been touched by technology for a very long time. Fashion companies set up themselves to produce merchandise cheaply without knowing what will sell. As a result, the fashion industry is the second-largest polluter in the world - 85% of everything produced ends up in landfills. However, with the increase in big data, specifically social media data, there is an opportunity to reliably predict consumer demand and address this inefficiency.
Product: Finesse is a vertically integrated fashion house that uses social media data and machine learning, along with community feedback, to decide what style to create and how much they want to produce. The Finesse AI engine has a two-step process. It first collects data from millions of social media comments, learns about what shoppers are looking for in clothes, and catches trends before they go mainstream. Once trends are identified, it creates 3D designs of merchandise which are shown to the Finesse user community. Users can then vote on the designs that they like. The final voting result can also inform the team on consumer demand and how many pieces they should produce.
Traction: Finesse recently raised an $11.3M Series from TQ Ventures, Cherry Ventures, and many more. They have a strong fanbase on social media, with 400K+ followers on TikTok and 340K+ followers on Instagram.
5. Hopper
Unique Insight: It’s not a secret that airlines charge different prices depending on when the ticket is purchased. Every traveler wants to buy their tickets at the best price; however, it’s hard to do so due to constant price fluctuation and information asymmetry.
Product: Hopper is an OTA that uses its machine learning prediction engines to help travelers decide whether they should buy their flight tickets now or wait for a better price. It accomplishes this by tracking all the flight tickets and using data to predict future price volatility. Combined with some other factors, such as the flexibility of the traveler and their risk aversion level, Hopper recommends the best time for the traveler to purchase their flights. It also has the same capability for hotel booking. Watch this video if you are interested in learning more about Hopper’s AI engine.
Traction: One of the fastest growing players in the travel space, Hopper has had over 70M downloads to date and booked $2B+ on travel sales in 2021. It recently did a secondary transaction that values the company at $5B.
6. Justpoint
Unique Insight: Legal services are archaic and inefficient. It’s hard for people to find the most suitable lawyers for their specific needs, ones that will most likely win them the case.
Product: Justpoint is an AI-powered platform that connects people with the right litigation lawyer and tools, with a focus on the personal injury space. It helps plaintiffs to find the lawyer that is best suited to solve their case based on historical cases. It also helps lawyers by taking on back-office tasks while improving litigation discovery using machine learning so that the lawyers can quickly understand the merits of the claim and obtain the best results. Lawyers on Justpoint work on contingency and get paid based on a percentage of the settlement amount. Justpoint makes money by taking a cut from that percentage.
Traction: Justpoint works with 1000+ law firms and receives over 100 cases per day. It raised a $6.9M seed round earlier this year from investors like Divergent Capital, Charge Venture, Weekend Fund, and many more.
7. Photomath
Unique Insight: Tutoring is a multi-billion dollar market for parents to seek out supplemental education for their children outside of the traditional classroom. However, private tutoring tends to be expensive and inaccessible for many families. As a result, many students tend to turn to their parents or the internet for answers- neither could provide the students with the adequate resources they need to understand the concepts behind the problems.
Product: Photomath is an AI app that helps students to solve tough math problems and explains the methodology so that students can understand the principles and concepts behind the answers. To use the app, students first need to snap a photo of the problem with their phone. The image then gets analyzed by Photomath’s neural network, which provides the formula for the scanned problem. After determining the formula, Photomath applies a problem-solving algorithm to the formula to provide the solution with a step-by-step explanation. Photomath makes money by offering a premium paid subscription called Photomath plus, which offers more support for the students.
Traction: Photomath has gotten over 300M app downloads and solves 2.2B problems per month. It raised a $23M series B last year led by Menlo Ventures.
8. Tonal
Unique Insight: Traditional strength training requires many unwieldy weight plates to create resistance. Tonal founder, Aly Orady, realized that you can leverage electromagnetic technology to create resistance that’s comparable to weights. Combined with AI, this technology would allow you to create a smart, electronic strength machine that you can place in your home.
Product: Tonal is a smart home gym machine powered by electromagnetic technology and AI. It has three main components - smart workout equipment, personalized training software, and training content. The equipment is an all-in-one workout machine with a touch screen display along with accessories you need for the workout, such as handles and bars. The software uses machine learning to provide users with personalized training, recommending users the most suitable workout and weight level based on previous workout data. In addition, Tonal has a large and growing content library with workout classes that users can watch on demand.
Traction: In 2021, Tonal raised a $250 Series E led by Dragoneer at a $1.6B valuation. It has expanded to 54 physical sales stations across the US after a recent partnership with Nordstrom.
9. Whisper AI
Unique Insight: According to Johns Hopkins, more than 38M Americans suffer some form of hearing loss and many of them require hearing aid support. However, most hearing aids today require thousands of dollars in upfront cost and do a poor job of adjusting to the noises in different environments. There is a big opportunity to create a modern hearing aid company to address these pain points.
Product: Whisper is an AI-powered hearing aid product that adjusts the sound quality based on your surroundings and improves over time from software updates. Whisper’s hearing system has three components - 1) hearing aids that fit on the ear 2) a pocket-sized external box called Whisper Brain that works wirelessly with the earpieces to enable a proprietary AI-based sound separation system 3) a smartphone app that you can use to update the software on the system so you don’t have to worry about replacing them every few years. The main AI sound separation engine uses deep learning to distinguish and separate different sounds even in the most challenging environments, such as restaurants or any crowded places, making it easy for users to still hold conversations in those environments. In addition, to increase affordability, Whisper offers a monthly payment option of $69 per month, instead of charging $2000+ upfront.
Traction: Whisper raised a $35M series A in 2020, led by Quiet Capital, with participation from Sequoia Capital, First Round Capital, and IVP.
This is part 1 of this topic. Please reply directly if you would like to see part 2 where I plan to dive into more consumer AI startups and some potential opportunities in the space.
See you soon 👋,
Leo
Definitely looking forward to part 2!
Great post!