‘There’s too much opportunity’ in Cerebral Valley

How 200 top AI experts and enthusiasts are riding an unprecedented wave

Evan Buhler moved to San Francisco’s Hayes Valley three months ago to build an AI company that would combine the buzzy technology and his experience as a startup attorney. At the time, he didn’t realize he had moved to the heart of a movement.

Hayes Valley, which has been nicknamed “Cerebral Valley” by tech enthusiasts and builders, is exploding with happy hours, networking events and hackathons focused on one thing: artificial intelligence. Some attribute the spotlight to a rise in hacker homes in the area. Others think San Francisco just needed some good press, but perhaps most importantly to eager entrepreneurs amid a downturn, it has the attention of top-tier investors.

“It almost feels like destiny. I think it’s going to become the economic and spiritual center of San Francisco,” Buhler said of his new stomping grounds. “I saw a competitor raise $5 million from OpenAI; the frothy environment is inspiring to a lot of entrepreneurs” who wouldn’t have made the jump otherwise, he described.

Buhler, looking to spread word of his new startup, was one of the 200 founders, investors, engineers and entrepreneurs at the one-day Cerebral Valley Summit, hosted by tech journalist Eric Newcomer and AI gaming startup Volley. Early-stage startups and storied entrepreneurs, buzzing with excitement, discussed the opportunity of the current moment on stage and at the literal watercooler.

All seemed to agree that the moment is unprecedented and we need to proceed with ambition, but also caution. People argued about how to do that; just days earlier, Elon Musk, Steve Wozniak and over 1,100 others signed a petition asking AI labs to pause for six months. Some entrepreneurs at the summit co-signed, while many didn’t. The backdrop of worry, coupled with the opportunity of masses adopting a new technological wave, has led entrepreneurs to come up with perhaps a not-too-surprising plan of action: focus, focus and focus some more.

Eric Newcomer interviews Emad Mostaque, CEO of Stability AI. Image Credits: Volley/Newcomer

Chun Jiang was in the second week of fundraising for Monterey AI when “generative AI” became coined as a term. After that mass market fluency, the money came flowing. While the hype has certainly helped with Monterey AI’s capitalization, the moat has been more elusive.

“With AI everyday, you don’t know what the new moat looks like; it might be your distribution,” Jiang said on stage.

Knowtex CEO Caroline Zhang started building her company over a year ago, which she thinks was the right time. “It was something we already had conviction on before; now we are riding the industry wave: having someone validate our market and use case,” said Zhang, who sells to doctors and physicians. As for hiring, Knowtex has never gotten more implications but Zhang says that the team is hiring conservatively. “YC teaches us to build things yourself until they break and then hire for that function,” Zhang said. The Knowtex team is only three people.

As YC startup founders prepare for Demo Day this week, other founders are busy but in different ways.

Volley co-founder Max Child said that “everyone — us in the gaming industry included — is struggling to process how to address a change of this magnitude in the short and medium term. Do we upend our entire business and rebuild using these tools? If only part, which parts? How fast? It’s unnerving and exhilarating at the same time.”

Ben Parr, the former editor-at-large at Mashable and co-founder of Octane AI, said that the business is profitable. He’s getting more inbound over the past few months than he had in a long time, but he’s not yet biting at investor interest. Partially because he thinks you can build a big company with few people, and partially because he’s not yet sold on how the hype will affect terms.

In his view, AI startups have the opposite problem of other startups out there: “There’s too much opportunity,” he said. As he sees it, investors don’t know which startups are going to break out, and that’s causing many people to wait on the sidelines. “The big question among investors’ minds is, will OpenAI eat you or will Stability AI eat you?”

Despite the focus, the hype is welcome. “Building a startup is like being punched in the face constantly, but it’s much much more fun when everyone is talking about a topic and there is new innovation,” Parr said. “Last year sucked. This year is great.”

Sapphire Ventures’ Cathy Gao invests mostly in late-stage startups, which means that she has time (and actually data) to make her check-writing decisions. She tells founders that they need to be able to prove that users are coming to their product not because of general AI enthusiasm, but because they want to trust their tool specifically.

Still, Gao tells TechCrunch there’s an “arms race” between big companies launching massive products and startups integrating AI to differentiate.

“It’s all about getting a lay of the land in terms of all the different companies, waiting and seeing which ones pop,” Gao said. “Is it going to be one company taking all, or a long-tail of companies that accrue value?”

If you have a juicy tip or lead about happenings in the AI world, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. No pitches please. Anonymity requests will be respected.