The Exchanges

Q Right. And since we are, in some cases, taking on things that previously were done by humans, how do you think about pricing, or what have we learned there? Are you, are you seeing most companies just basically replicate the pricing models of the previous version, or are there new pricing models that are coming up?

A Yeah, it's early, it's changing every month, and I would say that's maybe the number one question that we get from companies, is how should I price? How do you see other companies in this space pricing? I think we've seen a few models that are starting to work or that people are experimenting with. So the most obvious one is you just charge per minute. So you can calculate kind of an hourly rate for the voice agent, similar to, like, what you would pay a human. There's a couple maybe wrinkles here. One would be a lot of these customers are informed enough to know that the underlying technology is getting cheaper. So they will come to you and say, hey, why am I still paying 30 cents per minute when Your costs have gone down, and you're probably just taking all of that in margin. And then as these spaces get more competitive, it's very easy then for a newcomer to come in and say, hey, I'm gonna only charge five cents per minute, and just kind of undercut you based on that. The other thing about the price per minute model is it really just puts your value as a platform solely on the phone calls, which again are kind of commoditizing versus like the other software that you're building around the phone calls. So, I would say as a result of that, we've seen a lot of companies evolve from just doing price per minute to some sort of platform fee. Um, maybe it's per month, maybe it's pe…

AI assessment note: “we've seen a few models that are starting to work or that people are experimenting”

Q one who needed a reminder that Airbnb, Uber, a lot of these super familiar companies are marketplaces and also huge companies. I could even say generation defining companies that, um, didn't exist a couple decades ago, right? And so when we're evaluating these marketplaces and developing the marketplace, 100, how do we think about what metrics really matter? Because today in 2023, there really are so many marketplaces to compare.

A Yeah, we have a ton of amazing data this year. We expanded our sample size by three times, so there were more than 12,000 companies that we looked at when deciding kind of what would go in the marketplace 100. The number one factor we look at is consistent across years, and that's arguably the most important kind of top line metric for almost all marketplaces, which is gross merchandise value or GMV. So that's over the course of a year. For this report, it was the year 2022. How much did consumers transact? Aggregated across all of the purchases on the platform. So how much did people spend on your marketplace? And then we kind of ranked from top to bottom the platforms that had the most consumer spend. GMV in some ways is almost a lagging indicator of all of these other kind of amazing things that marketplaces have built to make themselves ideally a sticky and highly retentive platform. So while GMV is kind of the end result of all the work that they do, when we evaluate marketplaces to invest, we're often looking at things like growth in active supply and demand, conversion from listing to sale, and then retention. So both on the user side and on the revenue side, once a seller has sold an item, how likely is it that they come back to sell another one? And in the best case, they don't just come back to sell one more, but they sell one in the first month and then five in the s…

AI assessment note: “The number one factor we look at is... gross merchandise value or GMV.”

Q apps. And again, I'm feeling kind of old here, but during my era, you know, we're, we're thinking of Facebook, we're thinking of Twitter, um, Instagram, Snapchat, and none of these appeared in the top three. And so I don't know, what's your, what's your take there? Are we in like a new age? Are we diverging from the past in terms of what people want in terms of social?

A Yeah, it's a great question, and none of the, the kind of usual suspects, the Instagrams, the Snapchats, or the Facebooks appeared in the top at all, let alone the top three. The top five apps this year in terms of days at the top were actually all social media products, and three out of those five were apps that didn't even exist two years ago. That is definitely not always the case. I pulled the data for 2021 as well, and the top five for that year was a mix of some social media, but also FinTech, more utility or, or business apps like Zoom, and then traditional media apps like kind of HBO Max. To me, the fact that Instagram and Snapchat didn't appear at the top doesn't necessarily mean they're kind of dead as products. I think part of what it means is they've saturated the US user base, so they aren't getting a ton of new downloads every day.

AI assessment note: “three out of those five were apps that didn't even exist two years ago.”

Q to the top, but also staying at the top? It feels like we have smaller attention spans, people are excited to move on to the next thing instead of sticking with the applications that they know and love. Is that just me Interpreting the data, or are we actually seeing something here where it's not only harder to reach the top, but it's also harder to stay at the top?

A I completely agree. The largest number of apps that hit number one this year were number one for just a day, or maybe half a day, not that long at all. And more than half of the apps at number one were up there for less than five days throughout the whole year, not even five consecutive days. What I've seen is, you know, it's If you have a tick tock viral hit, you can maybe get a lot of people to download it, but then it needs to be a very strong product with network effects that encourages people to share it via word of mouth and to keep using it every day beyond that initial, oh, I saw this cool video about this app and I'm going to download it. So my view is it's in some ways easier to break into the top than it was five years ago. But it's probably actually quite a bit harder to stay at the top unless you have a very kind of magical and retentive products.

AI assessment note: “I completely agree. The largest number of apps that hit number one this year”

Q but I think there's maybe a further extension of that. Which is not just solo interacting physically, but also how, how do these digital apps potentially impact the way that we engage with other people physically, right? Like kind of a cyclical nature to our digital and physical lives. So are there examples of apps that you've seen that our online behavior actually penetrates the physical world or changes it?

A Yeah, absolutely. And, and I think like the first wave of subscription products, Uh, like the comms, the head spaces, the fitness apps, the nutrition apps were very much kind of single player mode and helping you optimize yourself and your life and your habits. We've definitely seen kind of this rise of this new wave of apps focused around relationships and really, you know, the app just needs you and one other person to work, but they'll prompt you with daily questions about the other person, things you want to talk about, basically ways to use this digital product to enhance This real world relationship that's happening and, and to maybe make things easier or to strengthen or to improve these relationships. The most kind of basic version of this was the widget apps that went popular. Lock it widget, the founder, um, he's a, his name is Matt Moss. I think he's either a college student or a recent college graduate. He made it for his girlfriend. They were in a long distance relationship and they wanted to see what each other was up to every day. Uh, and I think that use case is, is very strong of kind of how can we integrate technology more seamlessly to help us have better in person or in real life relationships. Another trend that we're seeing quite a lot of is apps and products, and especially platforms like TikTok, to be honest, driving traffic and driving engagement toward…

AI assessment note: “driving traffic and driving engagement towards real world businesses.”

Q to the top, but also staying at the top? It feels like we have smaller attention spans, people are excited to move on to the next thing instead of sticking with the applications that they know and love. Is that just me Interpreting the data, or are we actually seeing something here where it's not only harder to reach the top, but it's also harder to stay at the top?

A I completely agree. The largest number of apps that hit number one this year were number one for just a day, or maybe half a day, not that long at all. And more than half of the apps at number one were up there for less than five days throughout the whole year, not even five consecutive days. What I've seen is, you know, it's If you have a tick tock viral hit, you can maybe get a lot of people to download it, but then it needs to be a very strong product with network effects that encourages people to share it via word of mouth and to keep using it every day beyond that initial, oh, I saw this cool video about this app and I'm going to download it. So my view is it's in some ways easier to break into the top than it was five years ago. But it's probably actually quite a bit harder to stay at the top unless you have a very kind of magical and retentive products.

AI assessment note: “I completely agree. The largest number of apps that hit number one this year”

Q apps. And again, I'm feeling kind of old here, but during my era, you know, we're, we're thinking of Facebook, we're thinking of Twitter, um, Instagram, Snapchat, and none of these appeared in the top three. And so I don't know, what's your, what's your take there? Are we in like a new age? Are we diverging from the past in terms of what people want in terms of social?

A Yeah, it's a great question, and none of the, the kind of usual suspects, the Instagrams, the Snapchats, or the Facebooks appeared in the top at all, let alone the top three. The top five apps this year in terms of days at the top were actually all social media products, and three out of those five were apps that didn't even exist two years ago. That is definitely not always the case. I pulled the data for 2021 as well, and the top five for that year was a mix of some social media, but also FinTech, more utility or, or business apps like Zoom, and then traditional media apps like kind of HBO Max. To me, the fact that Instagram and Snapchat didn't appear at the top doesn't necessarily mean they're kind of dead as products. I think part of what it means is they've saturated the US user base, so they aren't getting a ton of new downloads every day.

AI assessment note: “three out of those five were apps that didn't even exist two years ago”

Q One interesting stat that you guys shared was the percentage of YC companies that are now pursuing AI voice. What are we seeing there in terms of how cohorts have changed and the percentage of, I guess, these new companies on the frontier actually pursuing this field?

A YC founders are typically, you know, young, high hustle, ambitious, and they're like heat Seeking missiles. And so they will pivot until they get into a space that's interesting. So in recent YC cohorts, upwards of 20, 25% of companies are, are building with AI voice, which is really exciting. We're even seeing a lot of companies from past cohorts all the way back to, like, twenty-nineteen, twenty-twenty, are going back now and pivoting into AI voice. The first wave after the infrastructure companies in voice we saw were pretty horizontal platforms that allow Anyone, any business, any consumer to build kind of a broad-based voice agent. Like, I built one that called the DMV for me and scheduled an appointment.

AI assessment note: “upwards of 20, 25% of companies are, are building with AI voice”

Q when they think about technologies replacing humans, and really this idea of augmentation as well. And you mentioned it also in the scenario of, like, let's say you take some company that, you know, only has a receptionist nine to five, what about five to nine or 24 seven? Can you talk a little bit about how you're seeing these AI companies wedge in and kind of start the engines?

A I would say a lot of businesses, I mean, small businesses to enterprise alike are, for their own reasons, like nervous to hand over all of their phone calls and customer interactions to an AI. So we'll often see these voice agents start with a specific wedge that just feels so obvious in terms of ROI to the business, and then as they gain trust, expand from there. So one of the most obvious and easiest ones are these after hours or overflow calls. So if you're a small business, you probably live or die by the ability to kind of get an appointment booked. Having that handled by an AI is kind of a no-brainer. Like at the very least, they can get a phone number and information and call back, but maybe they can actually book a full appointment for you and have like a job, you know, on deck for the next day, which is awesome. But beyond that, there's a lot of other kind of clever things that I think we've seen, uh, companies do. So there's some calls that just don't make sense. To make right now if you're paying human labor. Like, if you're a credit card company, you send out a credit card, uh, and the consumer never activates it, does it actually make sense to call them after one or two or three days and get them to do that? We see, I've seen a couple voice agents that are really successful now with that use case alone. Anything that's back office, it's not client facing, so it's, …

AI assessment note: “we'll often see these voice agents start with a specific wedge that just feels so obvious”

Q Yep. Since we're early days, what's your instinct about moats, right? That's, as you mentioned, like, that's true across the AI ecosystem, not just voice. Yeah. But where do you see moats potentially arising in this sphere?

A I see moats in a couple ways. So one would be integrations, and, and this is, I think, why we're especially excited about these more vertically focused voice agents, It's not gonna make sense for OpenAI to go integrate with every long tail, you know, transportation management software that a fleet company is gonna, or a freight company is gonna be able to need to run their, you know, fleet of, of trucks on a voice agent, uh, product. And similarly, UI. Like, OpenAI and, and other companies have a pretty set, you know, um, system for interaction right now that doesn't work the way that many of these, like, Heavily legacy businesses, uh, want to be able to operate. One of the types of moats that has been the most intriguing for us, I would say, especially for enterprises, is kind of this self-improving data moat. So if you are going to take over calls for, say, a large bank, they have a certain way that they want those to be done, and so you're not going to plug in a voice agent and have A hundred percent NPS on day one. It's gonna take months and months of training calls to make that better. And so you, as a voice agent provider, if you get in early, ah, benefit from having all that special proprietary data that just gives you months of a head start for anyone else who has to come along and go through that entire onboarding and integration and training process. And so I think th…

AI assessment note: “I see moats in a couple ways. So one would be integrations”

Q One interesting stat that you guys shared was the percentage of YC companies that are now pursuing AI voice. What are we seeing there in terms of how cohorts have changed and the percentage of, I guess, these new companies on the frontier actually pursuing this field?

A YC founders are typically, you know, young, high hustle, ambitious, and they're like heat Seeking missiles. And so they will pivot until they get into a space that's interesting. So in recent YC cohorts, upwards of 20, 25% of companies are, are building with AI voice, which is really exciting. We're even seeing a lot of companies from past cohorts all the way back to, like, twenty-nineteen, twenty-twenty, are going back now and pivoting into AI voice. The first wave after the infrastructure companies in voice we saw were pretty horizontal platforms that allow Anyone, any business, any consumer to build kind of a broad-based voice agent. Like, I built one that called the DMV for me and scheduled an appointment.

AI assessment note: “in recent YC cohorts, upwards of 20, 25% of companies are, are building with AI voice”

Q I mean, I think I've seen some data that you, you've all shared on Just how many visits or interactions some people are having? Maybe we just talk about that, because it's, it's kind of shocking in a way, but also not surprising in a way.

A Yeah, absolutely. So on, for the mobile products, as well as the web products, but especially interesting on mobile, because you can really granularly track a user and say, how much time are they spending per day, per month, how often are they coming back? And the insight there that I was, like, shocked by, and I say this as a big fan of the company, but Character AI has the average user Close to 300 sessions per month, which again is like 10 sessions per day. This is like iMessage usage, Snapchat usage, Instagram usage Really, yeah.. So I think we're starting to see like, yes, maybe the product isn't for everyone right now. Maybe, you know, it hasn't reached the true, true mainstream, but it's getting there, and the people who are using it are really using it and clearly finding like deep, deep value from it.

AI assessment note: “Character AI has the average user Close to 300 sessions per month”

Q year embedded within the charts. So let's look forward. We're now in 20, 23. We've got some great data from 20, 22, and I know you actually looked at 20, 21 as well. So we'll include that too in the show notes. But as we look forward, like what should we be paying attention to? What kind of apps do you think are going to thrive in this new year?

A So there's already an early, I don't want to say winner, but maybe an early leader for 2023. Which is Temu, which is a new commerce app developed by a large Chinese company called Pinduoduo. And in China, the version of this app is a full group buying experience. Say you're going to purchase a bag of apples or something, and the price on the app is two dollars. The more friends you invite to add a bag of apples to the order, the price can go all the way down to like 10 cents, five cents. Um, so it kind of gamifies commerce. The US version of it is, um, a little bit less sophisticated so far, but it is basically deep discounts on these Products that are largely kind of shipping from overseas. There is quite a bit of gamification around inviting your friends to get extra points that then you can win free items shipped directly from you, or even withdraw cash from the app by inviting other friends to download it. So unsurprisingly, that has resulted in a ton of downloads.

AI assessment note: “So there's already an early, I don't want to say winner, but maybe an early leader for 2023. Which is Temu”

Q year embedded within the charts. So let's look forward. We're now in 20, 23. We've got some great data from 20, 22, and I know you actually looked at 20, 21 as well. So we'll include that too in the show notes. But as we look forward, like what should we be paying attention to? What kind of apps do you think are going to thrive in this new year?

A So there's already an early, I don't want to say winner, but maybe an early leader for 2023. Which is Temu, which is a new commerce app developed by a large Chinese company called Pinduoduo. And in China, the version of this app is a full group buying experience. Say you're going to purchase a bag of apples or something, and the price on the app is two dollars. The more friends you invite to add a bag of apples to the order, the price can go all the way down to like 10 cents, five cents. Um, so it kind of gamifies commerce. The US version of it is, um, a little bit less sophisticated so far, but it is basically deep discounts on these Products that are largely kind of shipping from overseas. There is quite a bit of gamification around inviting your friends to get extra points that then you can win free items shipped directly from you, or even withdraw cash from the app by inviting other friends to download it. So unsurprisingly, that has resulted in a ton of downloads.

AI assessment note: “there's already an early, I don't want to say winner, but maybe an early leader for 2023. Which is Temu”

Q on the today show and had this big exclusive segment, which in the past would have been like, Huge for, for an application or a company. And he said he thinks it generated a thousand downloads. So I guess what I'm getting at is like, how do you effectively grow an app when a lot of the existing channels just don't really compare to this idea of word of mouth?

A I see word of mouth as kind of the purest maybe form and most lasting if you can get it right form of acquisition, just because the barrier that's probably hardest to overcome Like, I mean, you can pay people to download your app. You can pay influencers to talk about it, but to get a normal person who isn't looking for startups every day to recognize a new product and then go use it and then tell someone else about it because it's that valuable or interesting to them. That's kind of the ultimate to me, like the peak of a great consumer product. I do think we still see like TikTok as an organic channel is still very powerful. It's probably harder to build an audience on TikTok, especially as a startup, than it was a year and a half ago or two years ago, and it'll get harder and harder over time. Companies are starting to use TikTok ads, which is also interesting. Again, like, low cost for now, great channel for now, similar to how Instagram and Facebook ads got so much more expensive. Kind of the arbitrage opportunity of these new platforms tends to go away over time. What is interesting and always fun to see is sometimes there's these big acquisition moments that aren't at all orchestrated by the company, but orchestrated by the user base. And they're almost their own kind of special form of word of mouth, but at like massive scale. One of the top apps this year was called Tal…

AI assessment note: “I do think we still see like TikTok as an organic channel is still very powerful.”

Q so ignore the acquisition. If someone, a founder built a successful social app that trended even for a few months and made several million dollars, like I would say that's a success. It's not a fang level success where you go on to be multi-billion dollar company, but I think Maybe would you say there's an argument to people focusing more on that given the state of the app store?

A Oh, absolutely. I think it all comes down to what you as a founder are wanting to build. And I think the opportunity maybe has never been greater to build and monetize a mobile app quickly, make a few million dollars and retire if that's what you want to do. Uh, clearly Nikita is still building, so he's not at the retirement point yet. Um, but I think his, One of his last tweets about the app before the acquisition said they had had like, ten million downloads and six million in revenue, which is just amazing. There used to be this kind of paradigm in consumer where the goal was to build an app, get it to the mainstream, get it to Facebook level, Instagram level, millions, if not hundreds of millions of users, and then you would monetize people through ads, like the user kind of becomes the product. And now, I'm, I've been trying to pinpoint exactly what it is. I think it's a mix of like Apple Pay and Google Pay adoption and saturation, people getting more comfortable making purchases online. Maybe it's the younger generation, um, who is, you know, happy and feels safe buying something on their phone versus my parents' generation is still like suspicious of Venmo and thinks their money is going to get stolen every time. Um, but we are seeing many more apps get big and make money at the same time and at an early stage in their life. Lenza is another really good example of this, …

AI assessment note: “Oh, absolutely. I think it all comes down to what you as a founder”

Q but I think there's maybe a further extension of that. Which is not just solo interacting physically, but also how, how do these digital apps potentially impact the way that we engage with other people physically, right? Like kind of a cyclical nature to our digital and physical lives. So are there examples of apps that you've seen that our online behavior actually penetrates the physical world or changes it?

A Yeah, absolutely. And, and I think like the first wave of subscription products, Uh, like the comms, the head spaces, the fitness apps, the nutrition apps were very much kind of single player mode and helping you optimize yourself and your life and your habits. We've definitely seen kind of this rise of this new wave of apps focused around relationships and really, you know, the app just needs you and one other person to work, but they'll prompt you with daily questions about the other person, things you want to talk about, basically ways to use this digital product to enhance This real world relationship that's happening and, and to maybe make things easier or to strengthen or to improve these relationships. The most kind of basic version of this was the widget apps that went popular. Lock it widget, the founder, um, he's a, his name is Matt Moss. I think he's either a college student or a recent college graduate. He made it for his girlfriend. They were in a long distance relationship and they wanted to see what each other was up to every day. Uh, and I think that use case is, is very strong of kind of how can we integrate technology more seamlessly to help us have better in person or in real life relationships. Another trend that we're seeing quite a lot of is apps and products, and especially platforms like TikTok, to be honest, driving traffic and driving engagement toward…

AI assessment note: “We've definitely seen kind of this rise of this new wave of apps”

Q they just be combing through previous successful apps, like a Yik Yak, for example, and just creating the Yik Yak of 2023? Because we've seen how effective they can be and how also kind of evergreen they are, because there's these like innate human emotions like Gazzap to be complimented or be real to like To be understood, right? There's, like, these fundamental human emotions that don't change across generations.

A I feel like a consistent debate in the tech world of, like, who's gonna build the first anonymous social app that has, like, true staying power and becomes a billion-dollar company on its own. There's already, in twenty-twenty-three, a new app that just raised a seed round that hit number one in Germany. It's called Slay, very similar to Gazzap and TBH. So another example of kind of that trend. Playing out. I think there's, I mean, and Nikita himself has said this, there's always going to be a question of, um, These apps that are based around kind of anonymous, uh, networks. Can you really build like a lasting social network? Because people aren't really storing relationships on the app. They're not really communicating or direct messaging through the app. So they get very popular very, very fast. If there's no maybe act two of the app, like if there's no what's next, then they can also kind of decline very, very fast as that core dense group of people. That joined unravels a little bit more and moves on to the next thing.

AI assessment note: “It's called Slay, very similar to Gazzap and TBH. So another example of kind of that trend.”

Q Right. You also talked about a few characteristics, just to kind of crystallize that in terms of where we're seeing these AI agents be successful versus not. Can you just speak to those?

A Yeah. So definitely, I think, like, the lowest hanging early, early fruit, I guess, to grab would be these businesses that are already paying for a call center. Because they're already spending a lot of money on it, and it's already a pain point for them. Call centers are notoriously high turnover. They're hard to manage. So most businesses, honestly, probably want to get rid of that if they can. You know, the models are good now. They're just getting better and better every month. So I think we're still in a world where when the call has kind of a constrained Uh, process and outcome. Um, businesses are more comfortable. So for example, the voice agent knows going in, my goal is to book an appointment with this person, versus maybe like an amorphous, how do you, how do you even measure if this call was successful? We've seen some AI therapy voice agents, which are amazing, and I think are improving all the time, but in that case, it's much harder for the voice agent to know at the end of the call, did I do a good job? It's much harder for the company to know at the end of the call, did it, you know, complete the objective? And then I would say this gets back to the constrained point, but even though the voice agent is still probably doing better than your human agents, most businesses don't want to pay that much for it because it is AI and they see it as a way to cut costs. So …

AI assessment note: “when the call has kind of a constrained process and outcome”

Q I think people were surprised, quite frankly, that the AI Companions text version had caught on to the extent that they did. Were there any surprises with voice as that was introduced in terms of the adoption, the way that people were engaging with these companions or anything like that?

A So there's some companion platforms that are voice first. For example, Character AI added a voice mode and it got some crazy amount of usage in beta. I think actually a lot of people are kind of taking, for example, Inflection's Pi app or ChatGPT in voice mode and using it as a companion. And you might try it once because you're driving, or you're hands-free, or, you know, it feels more convenient. But, I mean, you say this a lot. Like, in many cases, the AI is more human than the human. For sure. Even your best friend, if you give them a call, they might be busy. They're at work. They're having a bad day. Are they actually gonna listen to every single word that you're saying and respond in kind of like an empathetic way and a thoughtful way? And the AI does that a hundred percent of the time, and they have more expertise. More expertise, more knowledge, more resources. This will only get better as the models improve, because we're still in, in the early days. Um, but a lot of people are shocked by how friendly it feels to talk to an AI.

AI assessment note: “Character AI added a voice mode and it got some crazy amount of usage”

Q It's a great point. And so far, we've talked a lot about B to B applications, but that's, you know, brings us right to consumer applications. Can we talk a little bit about what you're seeing there? Maybe the difference between, you know, what you're seeing in B to B and B to C?

A I would say B to B voice agents are more obvious than consumer or B to C voice agents, just because, again, it's the use case of replacing existing spend on humans on the phone for businesses. For consumers, maybe the Corollary there would be these high cost, uh, hard to access services that can now be performed by a voice agent instead of a human. Therapy and mental health support is one of those. Ed tech is another big one. Language learning. Uh, teaching your kid how to read, teaching your kid how to do math, which I think a lot of parents struggle with. Um, coaching, you know, how to have hard personal conversations. Those are all areas where we've seen a lot of voice agent, uh, pick up. The main, I think, open question on the consumer voice agents have been when a ChatGPT or soon a Claude can do a pretty good job with a lot of those basic consumer use cases. Where are the verticals or use cases where you need either a specialized model or a specialized interface to provide most of the value? The best models maybe are right now being held by OpenAI versus being available via API for any kind of standalone voice agent company to utilize. The biggest and best consumer companies are often surprises and are non-obvious, and so I, my gut is that whatever we see working in consumer voice is going to be something that it's hard to sit here and speculate on.

AI assessment note: “I would say B to B voice agents are more obvious than consumer”

Q Wow. You know, another trend you call out in the report is this idea that AI is a global pursuit. Yes. We're currently actually recording this in San Francisco, where a lot of tech has been built, but we're seeing, you know, like Mistral from France, and like, what else are you seeing in those global dynamics?

A Yeah, it's been really exciting, actually, and this was a big change even from V-one of this list to the most recent version. A lot more global pursuits, and I think that's a function of, to your point, many of these models are opening up a little bit, whether they're available via API or whether they're open source, and it, Allows anyone anywhere to build a really cool AI product. You don't have to be in San Francisco having raised, you know, fifty million dollars, although we love those companies as well. We have funded many of those companies also. Um, but you could be a solo developer in China, in Russia, anywhere. Mistral is a great example. PhotoRoom is another one on the list that made both the web and the mobile ranks. They're in France. As AI matures, These mafias of talent or hubs of talent are spinning out of different research labs, different universities, and kind of building these different communities of founders around the globe, which is very cool.

AI assessment note: “PhotoRoom is another one on the list that made both the web and the mobile ranks.”

Q Are there examples of industries where you feel like that's still untapped, where there is that supply that's waiting to be brought onto a marketplace?

A It's a great question. As we map marketplaces, there's categories of consumer spend, um, and there's some categories that still don't have a dominant marketplace, and so the question in those cases, especially if they're big categories of spend, is like, what is necessary to finally get a massive, hopefully, 10, 20, fifty billion dollar company up and running there? I would say one example where we've seen that Not happened quite yet. And where we're actively looking every week is home services. Um, and the problem with that one so far has actually been that repeat rate on like a day by day, week by week basis is still somewhat low. And so there's this question of how do you acquire customers in a way that you're still kind of making, you know, enough margin on the first or second order that you're not way underwater on what you paid to acquire them. But ideally, even better than that, you develop a brand or a subscription or something else that does keep them coming back more often than they normally might for just a broad home services platform.

AI assessment note: “one example where we've seen that Not happened quite yet... is home services”

Q you mentioned Lenza as an example, like, are there any themes or learnings from the ways that people have decided to monetize? Is it better to charge up front for the app? Is it better to have these in-app purchases? And if you're doing in-app purchases, it's like, are there learnings or themes in terms of how people have been able to effectively get people to Give their credit card.

A It's a very good question, and I actually feel that kind of gaming companies, both apps and just traditional games, have kind of You know, paved the way here in gaming. They have kind of this concept of like the whales, which is that the vast majority of your user base is probably going to be free users or generate very minimal revenue, but then you'll have some people who spend hundreds, if not thousands of dollars in, in, you know, every month on your app. And, and it really adds up over the course of a year. And so the goal is to kind of acquire free users as much as possible and then convert You know, the ones you can into that whale type behavior. I still think we've yet to see an app hit number one that charges for a download. For some reason, that kind of cognitive shift of like, I can't even see what it does or how it works before I pay. Still seems to be like a barrier for most consumers. What we're seeing most apps do is in-app purchases similar to games, and that's something like what Lenza did, um, where, you know, you get to the moment where you can deliver a lot of value and they'll pay for that specific item or that specific deliverable. Subscriptions are maybe the more classic for consumer apps of, um, how they monetize. I wrote about this the other day, but we had this first wave of consumer Description apps that were all charging 60 dollars a year. Like, think…

AI assessment note: “I still think we've yet to see an app hit number one that charges for a download.”

Q What would you do? What would you think about?

A Great question. You know, I have to say, and this might be due to personal interest, but there's this fascinating trend around dog ownership and dogs, especially for young people becoming the new children because people are having kids later or having fewer kids. They're spending more money on their dogs than ever before. And there are not that many kind of digital first pet brands. Um, so I would probably develop some sort of app around dog or pet ownership where you were able to show off or track or keep an eye on your pet in a creative or interesting way. I think the core of it would be that it generates some sort of shareable asset that then you could post across Instagram and Twitter and TikTok and show everyone how cute your dog is. So I think I need, I might be on the, in the idea maze, uh, on this idea for a little while longer, but there's hopefully something there.

AI assessment note: “I would probably develop some sort of app around dog or pet ownership”

Q they just be combing through previous successful apps, like a Yik Yak, for example, and just creating the Yik Yak of 2023? Because we've seen how effective they can be and how also kind of evergreen they are, because there's these like innate human emotions like Gazzap to be complimented or be real to like To be understood, right? There's, like, these fundamental human emotions that don't change across generations.

A I feel like a consistent debate in the tech world of, like, who's gonna build the first anonymous social app that has, like, true staying power and becomes a billion-dollar company on its own. There's already, in twenty-twenty-three, a new app that just raised a seed round that hit number one in Germany. It's called Slay, very similar to Gazzap and TBH. So another example of kind of that trend. Playing out. I think there's, I mean, and Nikita himself has said this, there's always going to be a question of, um, These apps that are based around kind of anonymous, uh, networks. Can you really build like a lasting social network? Because people aren't really storing relationships on the app. They're not really communicating or direct messaging through the app. So they get very popular very, very fast. If there's no maybe act two of the app, like if there's no what's next, then they can also kind of decline very, very fast as that core dense group of people. That joined unravels a little bit more and moves on to the next thing.

AI assessment note: “So another example of kind of that trend. Playing out.”

Q What would you do? What would you think about?

A Great question. You know, I have to say, and this might be due to personal interest, but there's this fascinating trend around dog ownership and dogs, especially for young people becoming the new children because people are having kids later or having fewer kids. They're spending more money on their dogs than ever before. And there are not that many kind of digital first pet brands. Um, so I would probably develop some sort of app around dog or pet ownership where you were able to show off or track or keep an eye on your pet in a creative or interesting way. I think the core of it would be that it generates some sort of shareable asset that then you could post across Instagram and Twitter and TikTok and show everyone how cute your dog is. So I think I need, I might be on the, in the idea maze, uh, on this idea for a little while longer, but there's hopefully something there.

AI assessment note: “I would probably develop some sort of app around dog or pet ownership”

Q I think it's the coolest thing to see all these different founders everywhere. Is there anything else you wanted to call out on the list in terms of new categories that you're seeing pop up?

A Yeah, I would say a big leading indicator for the list. Like, if you wanted to predict what's gonna be on the list in six months, Looking at the Discord data, you can even track, like, which Discord pages are getting the most invite traffic or things like that as a proxy for interest. And many of those companies that get really big on Discord, like Midjourney, like Pika, like Suno, will then go and launch an independent web app that does really well. And we've seen that be fairly predictive now of Suno was one of the highest ranking new companies that we saw on the list this time, and they just sprouted out of a successful Discord. It's such an advantage because then you can build up a base of hundreds of thousands or millions of users, and so you're not quite cold starting the website.

AI assessment note: “Suno was one of the highest ranking new companies that we saw on the list”

Q So this is our fourth year, and in 2023, we saw 34 newcomers. And I don't know about you, but 30% of the list being completely new marketplaces, that stands out to me. And so were there any surprising newcomers among that 34?

A Yes, we had a ton of newcomers this year. We also had a lot last year. We actually had a few more last year. I think it was 37. And to Connie's point about why we love marketplaces, I think this just shows how much opportunity there still is left to build, uh, companies that break out with this business model. Cause you might think like, oh, Uber is already public, Airbnb is public, Lyft's public, like how much more is there to build in marketplaces? And I think the answer is a lot. Uh, we had six, uh, newcomers in the top 20 this year, and we had one newcomer actually in the top 10, which is called Rock Auto. It's a bootstrapped Family business around selling car parts, which is so exciting to see.

AI assessment note: “we had one newcomer actually in the top 10, which is called Rock Auto.”

Q Any speculation from you guys? Is there a piece of hardware or something that we're going to be wearing or carrying around or using that's either attached to the phone or separate from the phone that could enable? Yeah.

A I think AI has scaled for consumers tremendously well, given it's mostly been text box in, you know, some, some output in a web browser out. And so I love the idea of AI kind of actually being with you and seeing what you see. It's funny, now when I go to tech parties, like, a lot of the under-twenties are wearing pins, That record what they're saying and doing, and they find, like, real value from them. That's one example. We've seen a new wave of products that can see what's happening on your screen and take action for you, help you, um, coach you, other things like that, that I also find really, really exciting. Um, and I think as also the agentic models get even better, it goes beyond just, like, suggestions to actually doing work for you, sending emails for you, um, which is very exciting for me, I think.

AI assessment note: “a lot of the under-twenties are wearing pins, That record what they're saying”