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December 16.2025
3 Minutes Read

Why Most Consumer AI Startups Lack Staying Power: Insights from Experts

Diverse team in smart-casual attire reflects on generative AI boom in soft morning light.


The Rise and Challenge of Consumer AI Startups

Even as the generative AI boom continues to capture attention, a significant trend has emerged among AI startups that cater to individual consumers: most remain unprofitable and underwhelming. With many initial applications being innovative yet ephemeral, industry experts are questioning the longevity of consumer-focused AI solutions.

The Early Days: Flashy Innovations Without Sustainability

Discussing the landscape at TechCrunch’s StrictlyVC event, Chi-Hua Chien of Goodwater Capital described many early consumer AI applications, like specialized video and audio tools, as "super cool." However, advancements in technology, such as magically integrated features in existing platforms like iOS, have often led to the swift obsolescence of once-popular standalone applications. This evolution echoes the fate of the flashlight app that skyrocketed in early smartphone days—once a third-party staple but soon replaced by baked-in functionality.

Market Dynamics: The Battle for Viability

Despite the rush towards consumer AI, the reality remains stark; most startups focus their energies on business-to-business sales rather than individual users. This shift suggests that while the technology has matured, the consumer applications have not yet caught up in terms of user engagement and utility. Elizabeth Weil from Scribble Ventures likened the current phase of consumer AI to an "awkward teenage middle ground," where the potential is present but the execution often falls short.

Stabilization Phase: Drawing Parallels with the Mobile Era

Chien draws parallels between today's AI landscape and the early mobile era—specifically, from around 2009 to 2010—when foundational mobile applications began to flourish. He suggests we are approaching a similar critical mass with AI technology. Google's Gemini and its rapid development signify that we may soon reach a point where consumer-focused applications begin to emerge that can stand the test of time, just as Uber and Airbnb did a decade ago.

The Role of Upcoming Devices in Consumer AI

Despite the current smartphone monopoly on app usage, experts believe that a new type of device may be necessary to unlock the full potential of AI in consumer markets. Chi-Hua Chien emphasized that the smartphone's limitations may hinder groundbreaking AI developments: "It's unlikely that a device you pick up 500 times a day but only sees 3% to 5% of what you see will drive new use cases for AI." This insight paves the way for the exploration of devices such as Jony Ive's mysterious screenless gadget or Meta's innovative smart glasses.

What’s Next for Consumer AI?

The quest to create ambient devices that can seamlessly integrate AI into daily life has spurred various ventures—many of which are yet to prove successful. While startups experiment with wearables and ambient devices, the question remains: will any of these innovations succeed in creating value-added experiences for consumers? Or will they fade like past tech fads? The answers could shape the future landscape of consumer AI.

Conclusion: The Future of Consumer-Focused AI Innovations

As the quest for sustainable consumer AI continues, entrepreneurs and investors alike must remain vigilant and adaptable, watching for the signs of stabilization in the market. Bigger shifts tied to new devices may facilitate significant breakthroughs that previously seemed distant.


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The OpenAI Mafia: Exploring 18 Startups Revolutionizing AI Industries

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