AI and the state of next-gen media

It’s almost two weeks into the new year, and venture investors are still buzzing with amazement (and often dismay) around the lofty prices which AI startups seem to defend. Most recently, Perplexity AI raised at $520M, justified by their “better-than-Google” search and discovery capabilities. Needless to say there’s continued venture capital interest in and conversation about AI applications and their funding history. That said, I’ve noticed a lack of discussion around AI startups in the “next-gen media” sector, which I’ll define in a moment.

The term “media” means something quite different to people who do not invest in early-stage startups — they likely think of content-heavy businesses like Comcast, Disney, Sony, and Netflix. But in the world of early-stage, “next-gen media” is often thought about as being some correction to TMT in the public sector, where the “T” for technology is over indexed to include consumer social media apps and even adtech and martech.

Despite the buzziness of generative AI, which more often than not includes content as output (i.e., text, images, audio, video), it seems to me that the media world has been included in the conversation mostly in the context of its positioning as input data into LLMs, lawsuits, and murky copyright concerns, but it is not a holistic representation of where I think that the conversation is headed in 2024. I believe that we’ll see the next-gen media sector have one of its major moments this year, as AI improves and content creation, consumption, and monetization follows suit.

As we know, venture capital interest in AI is large and growing, with early-stage AI-related venture dollars as a percentage of total venture dollars deployed this year exceeding 14%

This is a much different story when viewing AI as a sector as we might next-gen media. Venture capital interest in media has dwindled over the years, with 7% of total early-stage venture dollars falling within the sector.

But when we look at next-gen media funding in AI specifically, the media sector suddenly declines at a much slower rate and now comprises 10% of total venture funding. In other words, when AI becomes a horizontal and no longer a vertical which I believe it already has, next-gen media becomes an increasingly interesting place to spend time as an early-stage investor.

The numbers grow even more promising when we look at some of the latest and largest funding rounds. Of the top twenty largest early-stage funding rounds that happened in the last year, three (9% of capital raised) are definitively next-gen media, while eight (36% of capital raised) have some strong next-gen media application (albeit primarily not application-layer software).

Character AI lets users create characters, which may resemble favorite movie characters, therapists, or friends, and it lets users chat with them. Writer lets its teams create custom applications to enhance workflow, whether it be to improve the speed of content creation or to optimize analytics. Typeface focuses on the content creation piece of workflow. While these well-funded names primarily ingest and output text content, many of the AI next-gen media startups funded this year focus on video as output, and some focus on audio.

Here’s an overview of the top funding rounds that happened this year in the next-gen media x AI space:

Note that one of the names which is not included on this list, Infobot, is a BDMI investment that is working to make my roundup work here automated, as the company enables users to create custom newsletters, capturing data across the internet. I created a custom “Media x AI Venture Capital Funding Roundup” channel, which I very much can’t wait to come to fruition.

Thanks for reading, and if you’re in the New York area and feel like meeting other folks who also happen to be interested in this growing segment within AI, stay tuned to join the next AI for Media Meetup.