Blog
by Ann Bordetsky and James KaplanFeb 14, 2024
Generative AI is reshaping creativity at an astonishing rate, outpacing any previous tech evolution. ChatGPT’s rapid growth marks the dawn of widespread innovation driven by artificial intelligence. Beyond just enhancing text efficiency, AI’s real power lies in its potential as a creative force.
Generative AI tools have achieved product-market fit at a dizzying pace—faster than any platform shift in the past. OpenAI’s ChatGPT became the fastest consumer product to reach 100M MAUs, achieving the milestone in only 2 months [1], and kicking off a Cambrian explosion of generative AI innovation, from foundational models to new apps. While ChatGPT and LLMs are perfectly suited to make text-based knowledge more efficient, everything we’ve seen since suggests that creativity is really Gen AI’s first “killer use case.”
Source: Statistica, published December 2023 [2]
To put it in perspective, 15+ billion images were created with AI between 2022 and 2023, a figure greater than the total number of photos on Shutterstock and equal to one-third of all the images ever posted to Instagram [3]. Synthetic content, like this hilarious image of the Pope wearing a big puffer jacket [4], has gone viral. It’s even affected the stock market, like when an image of the Pentagon exploding fooled public markets investors into a brief selloff [5].
Massive engagement with AI image generators shows a clear shift towards AI-assisted creativity. These powerful tools democratize content creation, break down skill and cost barriers and open new avenues for self-expression.
We’re seeing AI supercharge existing creative mediums—from writing to graphic design to video—and unlock a tantalizing future where creativity is no longer bound by an artist’s technical skill and content creation no longer requires vast amounts of time and resources. AI tools bridge the gap between what we imagine and what we can create.
History provides abundant examples of the explosion of applications built when foundational platforms reduce the cost barriers stifling the adoption of innovation—from canals for trade in the industrial revolution to AWS for computing in modern times.
But beyond lowering cost and making artists more productive, AI models themselves have innate creativity that, combined with an artist’s clever prompting, can be a force multiplier on any user’s creative process.
LLMs are non-deterministic and hallucinate. As a result, models can potentially output truly original ideas with each iteration – the epitome of creativity.
“...hallucination is all LLMs do. They are dream machines. We direct their dreams with prompts. The prompts start the dream, and based on the LLM's hazy recollection of its training documents, most of the time the result goes someplace useful…Hallucination is not a bug, it is LLM's greatest feature.”
- Andrej Karpathy
This property allows AI to not only be a productivity tool, but also a creative sandbox where users can have fun experimenting with AI as a brainstorming assistant. Writers, for example, can prompt an AI tool with just a premise and generate a whole story. By instantly regenerating new stories, writers have infinite narrative directions to play with. These tools shift the focus away from technical skill and towards high-level creative thinking and decision making.
NEA graphic as of February 2024
AI is also powering previously unimaginable platforms that reinvent old mediums. We’ve seen AI-powered characters like Character.ai change the text-only experience of reading a book from a passive activity into a participatory one. Now, even though an author’s words might end with the last chapter, their characters can continue to live on in stories imagined by the reader.
AI tools help us with productivity, but also with generating truly original ideas, both lowering the barriers and raising the ceiling for creativity.
Big tech’s race to build strong technical teams that can harness AI for creative applications further underscores this potential. We have been impressed by Meta’s open source models, particularly with translation and video models that we believe rival some closed source competitors. Google [6] and Amazon [7] both announced image generation models, and Google has teased what looked like an incredible multimodal model in a demo that seemed too good to be true [8].
Photoshop was one of the early “killer apps” of the PC [9], driving computer sales and enabling any hobbyist with a computer to edit photos. Reduced design costs unlocked latent demand for design skills, and today it’s commonplace for companies to employ designers in-house rather than outsourcing all of the work to costly agencies.
We expect AI to rapidly eclipse the disruptive impact of Photoshop because it strives to drive the marginal cost to create content all the way down to zero. In particular, we’re excited about spaces like video, where the production of content itself remains a bottleneck, and UI design, which requires a highly technical skill set.
We believe video has become the most important medium, as it now represents 82% of all consumer internet traffic [10]. 88% of video marketers have teams of 2-10 people dedicated to creating content, and video content represents 21-30% of overall marketing budgets today [11]. We’ve also seen this focus on video extend into many other functions across organizations outside of marketing. HR teams, for example, are leaning into video as the dominant form for enterprise training because of its high levels of engagement [12].
By lowering costs, AI tools have changed the tradeoff calculus of choosing a medium, pushing creators towards more engaging mediums and unlocking more use cases for video.
NEA graphic as of February 2024
Companies like Captions, Veed, and Opus Clip help social media managers produce content more quickly by automating the editing, clipping, and captioning process. Given the need for constant iteration and the near-limitless opportunity for virality on billion-user social platforms, we think social media teams will use their time savings to create even more videos.
We’re also excited by companies building true 0-to-1 video generation. Companies like Genmo, Pika Labs, Runway, and Moonvalley have the potential to lower the marginal cost of video creation all the way to zero.
We’ve already seen some incredible solo-made video creations such as the Galactic Menagerie and The Grand Hogwarts School, which are Star Wars and Harry Potter movie trailers in the style of Wes Anderson. Both of these clips just scratch the surface of what’s possible here as controllability improves. At NEA, we created this short film entirely from clips generated on Genmo.
NEA video created on Genmo as of December 2023
While these general purpose video models are improving rapidly, we’ve already seen strong enterprise adoption by HR training, product marketing, and sales teams. These functions are leveraging use case specific avatar video platforms like Synthesia, Hour One, and HeyGen, which combine video editing features with a custom avatar who reads a script. As controllability improves, we expect to see more use cases will follow.
We’re fascinated by the potential to generate enterprise and social media videos, or even Hollywood films, with AI at near-zero cost. We also think there is an opportunity for immense TAM expansion, where these platforms spawn a new set of users who want to build for previously cost-prohibitive use cases.
User interfaces will also be fundamentally changed by AI. Going forward, we believe UIs will look very different, with some combination of traditional UI and ChatGPT-esque chat interfaces, merged with procedurally generated elements like Perplexity’s generative UI and Coframe’s generative A/B testing.
At the same time, the way UI is created will change. Non-designer stakeholders like engineers, product managers, and small business owners will be able to use AI tools to instantly generate UI (Galileo AI, Skippr, Uizard) and web design (Durable), and design and engineering roles across these functions will likely converge. And AI-powered developments in Design-to-Code empower designers and marketers to iterate more quickly without always having to involve the front end engineering team. Particularly for SMBs, we see these generative design tools as a wedge into building a larger suite of products that could include CRMs, content marketing, SEO, and more.
With these new creator tools, we’re also seeing the emergence of new distribution platforms.
AI's rapid product-market fit reminded us of this quote from a HuffPost piece about how Photoshop changed art in the late 1980’s [13]:
“[Photoshop] became widely popular as a tool used to confound the common populace with fake effects and filters...A man who had never set foot beyond his small town in Texas began telling stories of visiting the Pyramids of Egypt, and this was merely the start.”
Just like when Photoshop first launched, people are so amazed by what they can create with AI tools that they feel compelled to share these magical moments with others. Right now these sharing communities exist on Discord servers or subreddits like r/Midjourney, but we’re starting to see AI-first social apps like Ideogram and Can of Soup productizing this opportunity.
Ideogram and image of Ann Bordetsky building a robot in 2077 from Can of Soup as of December 2023
Looking back, nearly every big social platform spawned from a new creative form factor they popularized. TikTok had short-form lip-sync video, Instagram had filters for photographers, Twitter allowed only 140 characters of text, Snapchat had disappearing photo messages and stories, and YouTube was the first to tackle video.
We think there’s an analogous opportunity today with Gen AI, especially considering the immense potential to combine formats (image, video, animation, dubbing, voice, characters, sound effects, etc) into entirely new forms of self-expression and social sharing.
NEA’s company landscape for AI creativity tools as of February 2024
Gen AI has seen such strong initial user growth because it provides such quick time-to-magic. To sustain this early user buzz and achieve long-term relevance, we believe Gen AI applications for consumers and creatives will need to exhibit these characteristics:
Multiplayer and deep workflow integration. Full-stack tools that have daily usage are sticky, especially if they can include multiple stakeholders that were previously out of the loop.
The ability to win against incumbents and the flurry of new startup competitors. This competitive advantage can take many forms. Sometimes it comes from attacking a really hard technical problem like video or 3D. Sometimes it means outshipping the competition by building a less technically challenging product faster than copycats and building stickiness with deepened workflows after a wedge. Or it can mean being counterpositioned to incumbents, who would have to cannibalize their core business to compete.
Built-in virality. AI is powering a new wave of growth hacks that allow clever product minds to engineer strong K factors. We’ve come across some creative ideas here, such as features that let users remix each other’s prompts, or multiplayer features that allow users to create together.
First-to-market with a new creation format. History has shown that being the first to introduce an enduring format has often lead to success, even as incumbents integrate these formats into their own products, with TikTok and Instagram Reels being a great example. We’re really excited by companies that mashup different AI capabilities across mediums (image, video, voice, text, etc.) to discover what is most engaging. Taking a risk and pioneering a new format is the best path to building a sustainable platform.
Generative AI’s instant product-market fit across the creative spectrum has been incredible, and it’s where we think the next wave of generational companies will be born. If you’re building here, please reach out to abordetsky@nea.com and jkaplan@nea.com!
Notes and sources:
Reuters, “ChatGPT sets record for fastest-growing user base - analyst note” (February 2023), Accessed online in December 2023 at https://www.reuters.com/technology/chatgpt-sets-record-fastest-growing-user-base-analyst-note-2023-02-01/
Statistica, “Leading Discord servers among users worldwide as for December 2023, by number of members” (December 2023), Accessed in December 2023 at https://www.statista.com/statistics/1327141/discord-top-servers-worldwide-by-number-of-members/
Wired, “GenAI generated 15 billion images in one year, a feat that took photographers 150 years to achieve” (August 2023), Accessed online in December 2023 at https://wired.me/culture/ai-image/
Forbes, “That Viral Image Of Pope Francis Wearing A White Puffer Coat Is Totally Fake” (March 2023), Accessed online in December 2023 at https://www.forbes.com/sites/mattnovak/2023/03/26/that-viral-image-of-pope-francis-wearing-a-white-puffer-coat-is-totally-fake/?sh=108969461c6c
Bloomberg, “How Fake AI Photo of a Pentagon Blast Went Viral and Briefly Spooked Stocks” (May 2023), Accessed online in December 2023 at https://www.forbes.com/sites/mattnovak/2023/03/26/that-viral-image-of-pope-francis-wearing-a-white-puffer-coat-is-totally-fake/?sh=108969461c6c
TechCrunch, “Google debuts Imagen 2 with text and logo generation” (December 2023), Accessed in December 2023 at https://techcrunch.com/2023/12/13/google-debuts-imagen-2-with-text-and-logo-generation/
TechCrunch, “Amazon finally releases its own AI-powered image generator at AWS re:Invent 2023” (November 2023), Accessed in December 2023 at https://techcrunch.com/2023/11/29/amazon-finally-releases-its-own-ai-powered-image-generator/
TechCrunch, “Google’s best Gemini demo was faked” (December 2023), Accessed in December 2023 at https://techcrunch.com/2023/12/07/googles-best-gemini-demo-was-faked/
Britannica, “Adobe Photoshop” (December 2023), Accessed December 2023 at https://www.britannica.com/technology/Adobe-Photoshop
Cisco, “VNI Complete Forecast Highlights,” Accessed December 2023 at chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.cisco.com/c/dam/m/en_us/solutions/service-provider/vni-forecast-highlights/pdf/Global_Device_Growth_Traffic_Profiles.pdf
Hubspot, “The Video Marketing Playbook, Trends & Tips to Create Video Strategy in 2023,” Accessed in December 2023 at https://offers.hubspot.com/video-marketing-2023
Synthesia, “20 [AI] Training Video Stats You Need to Know In 2024” (November 2023), Accessed in December 2023 at https://www.synthesia.io/learn/training-videos/stats
HuffPost, “The Years In Retrospect: How Photoshop Has SHaped The World Of Graphic Design” (December 2023), Accessed in December 2023 at https://www.huffpost.com/entry/the-years-in-retrospect-how-photoshop-has-shaped-the-world-of-graphic-design_b_11848126
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