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Generative AI has emerged as a groundbreaking and captivating technology, capable of feats that have dominated press headlines and engaged a growing user base. Startups have raced to capitalize upon the fever-pitch surrounding ChatGPT and other generative AI models – and the recent release of OpenAI’s ChatGPT API has opened up the potential for countless niche products built on the back of the company’s super-powerful technology. But history shows longevity is uncertain – and risks plentiful – for companies too dependent on a closed-source API.
The ChatGPT API-based startup arena includes companies like Baselit (a so-called copilot for data analytics), Landbot (a no-code customer service chatbot builder), and BarriAI (APIs that allow you to build ChatGPT apps on the fly).
Many API-dependent companies of the past have suffered after having access revoked or usage costs suddenly increased. Thread Creator, a startup that offered users the ability to manage Twitter threads, which was unable to function when the company lost access to the Twitter API in 2021. Then there’s CanvasPop, which no longer connects with Meta-owned Instagram to print pictures straight from the app. Elon Musk recently announced a price hike for many users of Twitter’s API.
Users of the startups’ services also face risk, which could lead to regulatory or legal requirements to a degree that founders are not able to pivot to meet. The valuations of many companies rest on the value of data collected from users rather than simply the quality or demand of the product itself.
The problems with ChatGPT startups are multifold. For founders, building a product on top of another company’s proprietary model leaves developers vulnerable. “You’re dependent on somebody else’s platform and infrastructure, and then you have to pass that cost onto your own customers,” says Theo Priestley, author of “The Future Starts Now,” and long-time futurist,
If you use ChatGPT’s API, you pay based on a token system that reflects how “costly” it is to generate the text you need. This is important, considering that startups and developers using the API are held hostage if pricing shifts—which could trouble the overall competitiveness of industry pricing.
That issue melds with another, which is the replicability of ideas. “The ideas are ten a penny,” Priestley says.
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