a16z ai market map: The Rise of Horizontal AI

Horizontal AI refers to a type of AI that is applied across multiple industries and domains, rather than being tailored to a specific industry or domain. This approach allows for greater flexibility and scalability.

As companies like Google and Amazon have shown, horizontal AI can be incredibly powerful and valuable. By applying AI techniques to a wide range of problems, these companies have been able to drive significant innovation and growth.

One key trend in the rise of horizontal AI is the increasing use of transfer learning, which enables AI models to be trained on one task and then applied to another. This approach has been particularly effective in areas like natural language processing and computer vision.

The a16z AI market map is a game-changer for understanding the Generative AI landscape. Unlike last year's map, this one is organized by use case rather than model modality, reflecting the evolution of Generative AI from technology to actual value.

This shift highlights the increasing focus on practical applications that solve human problems end-to-end. Companies are now building comprehensive solutions that use foundation models as a piece of a larger puzzle.

The market is transitioning from "Act 1" to "Act 2", with companies like Harvey, Glean, Character, and Ava creating innovative applications that introduce new editing interfaces and make workflows stickier.

The market is entering a new phase, dubbed "Act 2", which will focus on solving human problems end-to-end.

This is a significant shift from the early days of the market, where applications were primarily based on foundation models. Now, companies are building custom LLMs and creating more comprehensive solutions.

Examples of companies leading the way in "Act 2" include Harvey, which is developing custom LLMs for elite law firms, and Glean, which is indexing workspaces to make Generative AI more relevant at work.

These companies are introducing new editing interfaces and making workflows stickier, with outputs that are better and more relevant.

This year's Market Map is organized by use case, reflecting the shift in the market towards practical applications of Generative AI. This change is a direct result of the technology's evolution from a tool to a solution that provides real value.

Generative AI is no longer just a technology hammer, but a means to achieve specific goals. The market is now driven by the need for tangible results.

Organizing the map by use case allows us to better understand the various applications of Generative AI. It's a more intuitive way to visualize the market, making it easier to identify trends and opportunities.

A new addition to the map is the LLM developer stack, which highlights the compute and tooling vendors that companies rely on for building generative AI applications in production.

The original promise of RPA was to automate tasks that traditional software couldn't handle, like data entry and document extraction.

Companies like UiPath, founded in 2005, promised to enable the "fully automated enterprise" and empower "workers through automation." They even went public with an IPO in 2021.

These early RPA companies couldn't deliver on their promise due to the limitations of the technology at the time.

Implementing these bots required expensive consultants, making RPA only accessible to large companies that could afford it.

The original vision of RPA is now possible with LLMs, which can be prompted with an end goal and empowered to take actions on behalf of the company.

The a16z AI market map is a comprehensive guide to the AI landscape, featuring 180+ companies across 18 categories.

The map is designed to help investors and entrepreneurs navigate the complex AI ecosystem.

The AI market is projected to reach $190 billion by 2025, with a growth rate of 33% per year.

This growth is driven by the increasing adoption of AI in industries such as healthcare, finance, and retail.

According to the map, the top 5 categories with the most companies are computer vision, natural language processing, and reinforcement learning.

These categories are also among the most funded, with computer vision receiving over $1.5 billion in funding in 2020.

The map highlights the importance of explainability and transparency in AI, with many companies working on developing more interpretable models.

This is a critical area of focus, given the increasing use of AI in high-stakes applications such as healthcare and finance.

The a16z AI market map is a valuable resource for anyone looking to understand the AI landscape and identify emerging trends.

Horizontal AI enablers are emerging as a key component in the intelligent automation landscape. This is because every intelligent automation company is building similar capabilities and internal tooling, creating an opportunity for startups to focus on one specific foundational component.

Companies like Reducto and Extend are working to be horizontal enablers, helping to solve specific needs such as parsing unstructured data and outputting contextualized, structured data.

The future of AI Ops is exciting, with a massive market opportunity waiting to be tapped. The potential market is enormous, with over 8 million operations/information clerk roles according to the Bureau of Labor Statistics.

This market is wide open for startups, with no existing software product for many workflows, giving them a greenfield opportunity. The people were the product, and as a result, these roles never developed systems of record.

The market opportunity is focused on two main areas: horizontal AI enablers that execute a specific function for a broad range of industries, and vertical automation solutions that build end-to-end workflows tailored to specific industries.

Horizontal AI enablers are companies that simplify the process of building intelligent automation by focusing on one specific foundational component.

Many intelligent automation companies have built internal tooling to parse unstructured data and output contextualized, structured data, but companies like Reducto and Extend are working to be the horizontal enabler to solve this specific need.

Building web data crawlers is another core building block needed for complex intelligent automation.

Companies have to structure data from unstructured sources, which can be a time-consuming and labor-intensive process.

Writing data back to legacy systems is also a crucial component, but often requires custom solutions.

The a16z AI market map is a comprehensive guide to the AI landscape, and it's fascinating to see the industry's growth and evolution. According to the map, there are over 200 AI startups, with a significant number of them focused on computer vision.

One notable trend is the rise of edge AI, which is expected to reach $12.9 billion by 2025. This shift towards edge AI is driven by the need for faster and more efficient processing of data.

Companies like C3.ai and Palantir are already leveraging AI to drive business outcomes, with C3.ai's platform being used by over 70% of the Fortune 100. The potential for AI to transform industries is vast, and it's exciting to see the impact it will have.

We're entering a new phase of the market, dubbed "Act 2", where applications focus on solving human problems end-to-end.

These applications are different from the first ones, using foundation models as part of a more comprehensive solution rather than the entire solution.

Companies like Harvey are building custom LLMs for elite law firms, making them a great example of this new trend.

Glean is also crawling and indexing workspaces to make Generative AI more relevant at work, showing the potential of Act 2 applications.

Character and Ava are creating digital companions, which is a new and exciting area of development in Act 2.

This week's newsletter highlights insights from top VCs, featuring a curated selection of posts from the website.

Coatue, A16Z, Sequoia, Cowboy, CRV, and others share their perspectives on the industry.

The newsletter covers posts from November 13th to 19th, providing a snapshot of the latest trends and ideas.

These top VCs are known for their expertise and influence in the industry.