AI Wrappers: The rise of AI wrappers and the challenges ahead

In just a matter of months, artificial intelligence (AI) has become a mainstream and global phenomenon, largely propelled by the rapid success of OpenAI’s ChatGPT. No day goes by without a headline on AI. The recent surge in AI popularity has not only sparked the emergence of new competitors but has also led to the birth of startups creating novel AI tools centered around AI-powered chatbots like Google Bard, ChatGPT, and Meta Llama 2, among others.

Interestingly, a significant driver behind the broader accessibility of AI lies in the proliferation of AI wrappers, which are also referred to as API wrappers or libraries. These wrappers essentially build on top of pre-existing AI tools like ChatGPT and Bard. In the first half of this year, we see a plethora of generative AI products coming into the market.

However, our findings revealed that many of these products are nothing but AI wrappers built on top of the existing Large Language Models (LLMs) such as OpenAI’s offerings. The differentiating features often involve fine-tuning and a user-friendly visual interface. But that doesn’t really matter to the deep-pocket investors who already bought into the hype.

While many other startups are grappling with the difficulties to secure funding due to the global economic climate, we also see that generative AI startups continue to raise funding as VCs pour billions into this field. Every day, we read headlines about new generative AI startups or projects being launched and announced on platforms like Twitter.

The allure and prestige of being a founder backed by VCs have proven irresistible to many of these entrepreneurs.  Meanwhile, the ongoing AI funding boom can be attributed to the sudden success of ChatGPT as VCs look to find the next big winner. The hype is one.

In recent months, we’ve seen how the success of ChatGPT has inspired numerous generative AI startups to create AI tools that can integrate with large language models (LLMs) such as ChatGPT and Google Bard. This integration aims to make these models more user-friendly and accessible to a wider range of developers and businesses.

However, many of these tools essentially serve as generative AI wrappers or user interfaces for consumers. Services like having an AI interior designer for your living space or accessing legal research are indeed valuable to consumers. Nonetheless, several of these features are likely to be developed by existing larger products.

Are AI wrappers in trouble?

As AI wrappers gain popularity, they offer various advantages while also raising important questions about potential obstacles ahead. The future winners in the AI ecosystem remain uncertain. However, signs of strain within generative AI startups have already begun to surface.

For instance, two technology startups that were working on products utilizing generative AI recently had to lay off employees. In July, Jasper AI had to downsize its workforce, and the head of product also departed. This occurred despite the company securing a substantial $125 million Series A funding with a valuation of $1.5 billion in October of the previous year.

The second startup, Mutiny AI, also had to reduce its staff by around 30%, which equated to about 30 job losses, according to former employees who were affected.

With thousands of AI tools (AI wrappers) out there and new ones popping up every day, it’s becoming increasingly difficult for generative AI startups to generate revenue and cover their expenses, especially given the competition from numerous free and open-source alternatives.

Given the currently crowded and saturated AI landscape and the influx of numerous startups into the AI realm, it’s only a matter of time before we witness some of these startups facing challenges and potentially shutting down.

Below is a YouTube Short from Chris Stegner, CEO of Very Big Things, discussing the future of AI and the pros and cons of AI Wrappers.