1Mby1M Virtual Accelerator AI Investor Forum: With Jishnu Bhattacharjee, Managing Partner at Nexus Venture Partners (Part 2)

Sramana Mitra: Let me synthesize this point for our audience. In startups that are going the open source route, including non-AI startups, what is great is that developers with insights put something out there in the open source realm and start getting usage. Then, by the time they go out for investment, often there’s a lot of history of usage that has built up and some of that has started to monetize. There’s a little bit of a monetization model that is starting to emerge. Even if it hadn’t emerged yet, if there is substantial usage and value creation, there is a tried-and-true path of monetizing commercial open source in a freemium mode, where basically people start with free and then become premium.

In general, I’m not a big fan of freemium, but in the open source case, it’s a different story because you’re starting with a tremendous number of leads. Usually, a lot of them are B2B businesses building applications on top of open source, so it’s not such a stretch to think about turning free projects into paid projects by applying the commercial open source principles like paid support and premium functionality. This is well understood in the investment community as well today, now that we have had a bit of this run. That’s what we are talking about here. H2O.ai went to market as an open source AI platform. It has had a tremendous amount of success with that business model.

So let’s go back now to Jishnu. Talk about what is your current view of the world vis-a-vis AI and where does open source play in that as well as a sub category of that discussion? But first overarching discussion on what is the AI investment thesis from Nexus?

Jishnu Bhattacharjee: We are living in a surreal time when the impression the Silicon Valley world is driving is that everything will be changed by AI. Of course, like anything else in life, this statement is also nuanced. In November 2022 when ChatGPT came in, it was an unprecedented inflection point. Why? It was the first time that people started appreciating what artificial intelligence is. It was right in the face. It was not some trend line, or something happening in the background, but it was the first time that people were seeing machines do creative stuff like write a poem or an essay.

I think that definitely changed the trajectory in terms of appreciation of AI across the world. That is not limited to AI practitioners or people knowledgeable about these subjects, but rather anyone and everyone with a computer can now appreciate AI. That was a phenomenal, monumental time.

At that time in 2022, big companies – OpenAI, Microsoft, Google, and later Amazon- started driving a narrative saying that this is great, that we’re building artificial intelligence at an unprecedented level, and that machines can do a lot of stuff. But for that, you need huge amount of money and resources. There have been big foundation models that are built using web data and that started inspiring people on what is possible. Over the last two-three years, tremendous progress has happened in the open source realm of generative AI. In practice, you don’t need these such large language models from all these big companies. There are probably thousands of models which have come up called small language models (SLM), which are very well placed to serve enterprise use cases or task-specific jobs. All this is thanks to open source. It has led to citizen innovation.

Open AI deserves a lot of credit for opening up the imagination of human mind and the confidence that it can be done because before they showed it, principles were understood, techniques and architectures were coming up, but people still didn’t have that confidence that it can happen. And then the pace of innovation has been just unimaginable.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator AI Investor Forum: With Jishnu Bhattacharjee, Managing Partner at Nexus Venture Partners
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