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Generative AI
The deep learning chronicles:
the GAN, the Transformer and
the Neural Network
An Otter wearing a cowboy hat reading a book in a
whimsical forest with Leonardo.ai Trained community
model “Studio Ghibli style”
1
Let’s decode the buzz-word of the year.
How does it work?
Engineers train GenAI model
Users can input prompts with the desired
outcom
The AI model then generates content.
Why 2023?

Well...AI can generate images that
look like .
this
Generative AI is a type of Artificial
intelligence capable of creating new digital
content.
Isometric illustration of a cyberpunk character at a computer desk,
3D rendering with Leonardo.ai Stable diffusion 2.0
Generative AI is a type of
deep learning application
2
IBM. AI vs machine learning vs deep learning vs neural networks: What's the difference? [Blog post].
Withalongstory
onitsback.
3
2013
1950
1965
1980
1997
2014
2017
2018
2019
A team at Google
Brain introduces
transformers, a new
NN architecture
used initially in NLP
models.
Ian Goodfellow and
his team develop
GANs which
opened the door to
increasingly
accurate & varied
outputs.
LSTM, a new gating
unit together with
GRU, allows RNN
models to capture
long-term
dependencies &
improve NLP
models’ results.
Hidden Markov
Models (HMMs)
and Gaussian
Mixture Models
(GMMs) were
introduced as one
of the first
generative models
to generate
sequential data.
Ivakhnenko with
his work showed
that deep neural
networks have the
potential to learn
complex patterns
& create diverse
outputs.
RNNs are first
introduced in the
1980s. Their
recursive nature
allows the models to
learn information
from the previous
time steps, but they
struggle with long
term dependencies.
Open AI releases a
paper on how
combining
transformers &
unsupervised pre-
training greatly
improves NLP
models.
NLP language
models start
adopting
transformers such
as Bert, GPT-2 &
ELMo.
The Variational
Auto-encoder
(VAE) is
introduced, which
is still an
underlying concept
of stable diffusion.
Chat GPT-3 sets
the beginning of
the Generative AI
“gold rush”.
The first multimodal
models such as CLIP
start appearing, where
vision and language
are combined allowing
it to be trained on a
massive amount of
text and image data.
Chat GPT-4 vastly
outperforms its
predecessors and
different use-cases for
GenAI start appearing.
Generative AI starts
outperforming humans
consistently.
2021
2023
2022
2030+
4
ThathasfirstledtoGANS
Random Input
vector
Generator Model
Generated fake
example
Real examples Discriminator Model
Update model after binary classification
Real
False
Duck swimming in a river with Leonardo.ai
& Stable Diffusion 2.0
OpenGenus IQ. GANs: Overview with applications.
5
and then to transformers
Transformers are
used to transform one sequence into another
sequences with dependencies and
connections as they don’t have memory
to focus on key terms in the sentence for context,
allowing
This technology has the potential to revolutionize
the way we interact with language and
.
a Neural Network architecture
(Seq2Seq)
Traditional Seq2Seq models have more trouble
at translating
Transformers leverage the attention mechanism
for more accurate translations
can be
applied to various fields like images and audio
Domino Data Lab. Transformers & self-attention to the rescue: A primer.
6
Generative AI can be
in
classified
multiple ways
Industry
Applications
Businessfunctions
Businessmodel
TechStack
Tex
Vide
Imag
Audi
Code
Dataanalytic
Sales&marketin
Productdesig
Knowledgemanagemen
Customersupport
Datastorag
Foundational
modeltrainin
Finetunin
Frontendapps
Application
Sellingmodel’s
API
Opensource
model
E2Eplay
Healthcar
Financ
Media&entertainmen
Gamin
Fashion&design
Platform layer
Application layer
Open Source models

Models released as trained weights
(shared and hosted on model hubs)

Image
Text to
imag
Desig
3D
renderin
Image
editing
Video
generatio
Video
editin
Avatars
creation
Code
generatio
Debuggin
App
building
Video
Code
Closed Source models

large scale, pre-trained models
exposed via Apis
Audio
Text
Voice synthesis
Music creation
Text to speech &
speech to tex
Dubbing
Writing general
tex
Chatbot
Synthesis and
insight
Search engine
Data input 

(stored in cloud)
Fine tuning

(based on use case)
7
Ourapproach:combining
thetechstackwithits
applications.
E2E
Model
repository
Open
source
API play
Platform
Image
Text
Audio
Code
Video
Application
Multi modal
8
The
Market
Andwithalittle
twist,GenAI
businessmodels.
Link to our Notion Database with the companies analysed in our market mapping.
9
Unlocking new
in
business functions
different industries
Data &
Analytics
Product
design
Research &
Development
Sales &
Marketing
Knowledge
management
Use cases
Industries
Impacted
Generate
synthetic dat
Obtain data
insigh
Automate data
integration
Financial
analytic
E-commerc
Logistic &
transport
Ads & content
creatio
Customer
insights gen
Lead
generation
Media &
comm
Consumer
good
Retail
Drug
discover
Material
desig
Simulation
and modelling
Healthcare &
biotec
Industrial
good
Chemicals &
energy
Answering
internal Q
Content
categorisatio
Expert
systems
Finance &
Managemen
Professional
services

3D image
generatio
Real time
sketche
Streamlined
UI/UX design
Manufacturin
Fashio
Consumer
good
gaming
10
Whereisthemoneygoing?
CB insights. The state of generative AI in 7 charts.
110 35%
new deals, at seed stage
Investments in Generative AI since 2017
% of investments by stage in GenAI as
per the latest disclosed round
11
Generative AI gained significant attention in 2019 with Open AI's seed round, but it wasn't until 2022 when
the hype cycle truly began, as advancements in GenAI produced remarkably human-like results and
startups pushed the boundaries further with new technologies such as Chat GPT 3.5 and stable diffusion.
CB insights. The state of generative AI in 7 charts.
12
Our compass to navigate new
opportunities in the layer
platform
Industry
specific
Industry
agnostic
Multimodal
play
Vertical
play
Industry
focus
Use cases
Multifunction
Industry
Solutions
Function Tailored
solutions
Use case focused
solutions
General Purpose
models
Multimodal LLMs have a
larger addressable market
opening up synergies
opportunities.
These models tackle a
large market, but have
limited defensibility due to
an unclear GTM.
Focusing on specific industries will allow for
better GTM strategies & higher defensibility for
specific use cases
Commoditisation.

Open-source models are already being
trained on similar amounts of data than
closed-source ones and are leveraging on
similar transformers algorithms, hence
drastically reducing margins for
differentiation.
New wave of diversification

The market will rapidly mature and
diversify as more pre-trained models
emerge. New model designs will offer more
choices for balancing size, transparency,
versatility and performance.
13
Ourcompasstonavigatenew
opportunitiesinthe layer
application
High
Low
Feature Product
Fine
tuning
Coreoffering
GenerativeAI
integrations
IroncladGenAI
solutions
Tech-undifferentiated
product
Plug-insolutions
Pre-existing product that
integrates generative Ai
among their features.
Offers a solid defensible
product, targeted to
specific industries and/or
use cases
Limited mid-long term defensibility, due to low
barriers to entry for similar players. Brand and
UX led differentiation.
Add to the
model more
proprietary
data
Use Public
available
foundational
models like
ChatGPT
Virtuousflywheel

Companies that achieve success will be
those that can create a virtuous flywheel
cycle, where increased usage of their
platform by users generates more data,
which in turn is used to refine their models
and deliver improved and personalised
outcomes.

Redocean.

Many of the first waves of generative AI app
companies getting into the market today
are usually poorly performing on both of
these two axis, mostly leveraging the
emerging large foundation models and with
a few-to-none fine-tuning process.
14
Dataprivacyisthemost
pressingmacrorisk
Copyright
DataPrivacy
Ethicalconcerns
Machine-generated content is based on real
data from real people, but who is the true
author?

l

Fact or Fiction? Fake content is a challenge as
misleading information can be easily created
with generative AI. Privacy matters. Several regulatory challenges
appear in terms of compliance. 


Investors beware. Italy’s temporary ban and
Britain’s data watchdog warning highlight the
importance of compliance when assessing
GenAI companies.
Concerns have been raised regarding
potential biases in content generation &
impacts on employment, warranting
careful data selection and bias
mitigation to avoid perpetuating
societal issues.
Stanford University. Generative AI: The power and promise of AI that creates [PDF]

AI Multiple. Generative AI ethics: The key considerations for developers.
15
It's an AI talent war out there. The ability to
attract, retain, and manage talent is make-
or-break for companies. As the talent
landscape gets trickier, nailing team
dynamics becomes crucial for generative AI
success!
Talentshortage
LackofProvenBusinessModel
Uncertain business models, with no proven
success stories, making it challenging to
assess investment opportunities in the
evolving landscape.


m

This situation adds uncertainty to investment
decisions.
DependenceonR&D
Generative AI is a frontier that's constantly
evolving, demanding investments in R&D to
stay ahead. Investors need patience and a
long-term perspective in this fast-paced
landscape. It's all about idea execution for
sustainable success!
Lack of
make it harder to assess single
companies
proven business models
Stanford University. Generative AI: The power and promise of AI that creates [PDF]

AI Multiple. Generative AI ethics: The key considerations for developers.
16
What's next?
Let’s ask our
crystal ball
Cyberpunk Alexander Platz with Leonardo.ai & Stable
Diffusion 2.0
Our World in Data. Artificial intelligence timelines. Sequoia Capital.. Generative AI: A creative new world.
2023
2025
2030
2033
2035
???
Models still have limitations & rely
on good human prompters. 3D and
video generation still in their
infancy.
Models able to produce better
final drafts than the average
human. Video & 3D media are
catching up.
Improved memory and context
awareness in AI leads to professional
level results. 


Hyper personalisation & new workforce
requirements are 2 important
disruptors in the business world.
Advancements in medical research
enable tailored treatments for
patients, potentially impacting
human life expectancy.
The Metaverse: Synthetic
avatars are starting to take
over our digital footprint.
90% 356 AI experts in 2022 predict
that human-like AI will be achieved
within the next 100 years. 50% say
before 2061.
Giddy Up Gen AI Style
Cyberpunk Cowboy in the middle of
the desert with Leonardo.ai

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Cavalry Ventures | Deep Dive: Generative AI

  • 1. Generative AI The deep learning chronicles: the GAN, the Transformer and the Neural Network An Otter wearing a cowboy hat reading a book in a whimsical forest with Leonardo.ai Trained community model “Studio Ghibli style”
  • 2. 1 Let’s decode the buzz-word of the year. How does it work? Engineers train GenAI model Users can input prompts with the desired outcom The AI model then generates content. Why 2023? Well...AI can generate images that look like . this Generative AI is a type of Artificial intelligence capable of creating new digital content. Isometric illustration of a cyberpunk character at a computer desk, 3D rendering with Leonardo.ai Stable diffusion 2.0
  • 3. Generative AI is a type of deep learning application 2 IBM. AI vs machine learning vs deep learning vs neural networks: What's the difference? [Blog post].
  • 4. Withalongstory onitsback. 3 2013 1950 1965 1980 1997 2014 2017 2018 2019 A team at Google Brain introduces transformers, a new NN architecture used initially in NLP models. Ian Goodfellow and his team develop GANs which opened the door to increasingly accurate & varied outputs. LSTM, a new gating unit together with GRU, allows RNN models to capture long-term dependencies & improve NLP models’ results. Hidden Markov Models (HMMs) and Gaussian Mixture Models (GMMs) were introduced as one of the first generative models to generate sequential data. Ivakhnenko with his work showed that deep neural networks have the potential to learn complex patterns & create diverse outputs. RNNs are first introduced in the 1980s. Their recursive nature allows the models to learn information from the previous time steps, but they struggle with long term dependencies. Open AI releases a paper on how combining transformers & unsupervised pre- training greatly improves NLP models. NLP language models start adopting transformers such as Bert, GPT-2 & ELMo. The Variational Auto-encoder (VAE) is introduced, which is still an underlying concept of stable diffusion. Chat GPT-3 sets the beginning of the Generative AI “gold rush”. The first multimodal models such as CLIP start appearing, where vision and language are combined allowing it to be trained on a massive amount of text and image data. Chat GPT-4 vastly outperforms its predecessors and different use-cases for GenAI start appearing. Generative AI starts outperforming humans consistently. 2021 2023 2022 2030+
  • 5. 4 ThathasfirstledtoGANS Random Input vector Generator Model Generated fake example Real examples Discriminator Model Update model after binary classification Real False Duck swimming in a river with Leonardo.ai & Stable Diffusion 2.0 OpenGenus IQ. GANs: Overview with applications.
  • 6. 5 and then to transformers Transformers are used to transform one sequence into another sequences with dependencies and connections as they don’t have memory to focus on key terms in the sentence for context, allowing This technology has the potential to revolutionize the way we interact with language and . a Neural Network architecture (Seq2Seq) Traditional Seq2Seq models have more trouble at translating Transformers leverage the attention mechanism for more accurate translations can be applied to various fields like images and audio Domino Data Lab. Transformers & self-attention to the rescue: A primer.
  • 7. 6 Generative AI can be in classified multiple ways Industry Applications Businessfunctions Businessmodel TechStack Tex Vide Imag Audi Code Dataanalytic Sales&marketin Productdesig Knowledgemanagemen Customersupport Datastorag Foundational modeltrainin Finetunin Frontendapps Application Sellingmodel’s API Opensource model E2Eplay Healthcar Financ Media&entertainmen Gamin Fashion&design
  • 8. Platform layer Application layer Open Source models Models released as trained weights (shared and hosted on model hubs) Image Text to imag Desig 3D renderin Image editing Video generatio Video editin Avatars creation Code generatio Debuggin App building Video Code Closed Source models large scale, pre-trained models exposed via Apis Audio Text Voice synthesis Music creation Text to speech & speech to tex Dubbing Writing general tex Chatbot Synthesis and insight Search engine Data input (stored in cloud) Fine tuning (based on use case) 7 Ourapproach:combining thetechstackwithits applications.
  • 10. 9 Unlocking new in business functions different industries Data & Analytics Product design Research & Development Sales & Marketing Knowledge management Use cases Industries Impacted Generate synthetic dat Obtain data insigh Automate data integration Financial analytic E-commerc Logistic & transport Ads & content creatio Customer insights gen Lead generation Media & comm Consumer good Retail Drug discover Material desig Simulation and modelling Healthcare & biotec Industrial good Chemicals & energy Answering internal Q Content categorisatio Expert systems Finance & Managemen Professional services 3D image generatio Real time sketche Streamlined UI/UX design Manufacturin Fashio Consumer good gaming
  • 11. 10 Whereisthemoneygoing? CB insights. The state of generative AI in 7 charts.
  • 12. 110 35% new deals, at seed stage Investments in Generative AI since 2017 % of investments by stage in GenAI as per the latest disclosed round 11 Generative AI gained significant attention in 2019 with Open AI's seed round, but it wasn't until 2022 when the hype cycle truly began, as advancements in GenAI produced remarkably human-like results and startups pushed the boundaries further with new technologies such as Chat GPT 3.5 and stable diffusion. CB insights. The state of generative AI in 7 charts.
  • 13. 12 Our compass to navigate new opportunities in the layer platform Industry specific Industry agnostic Multimodal play Vertical play Industry focus Use cases Multifunction Industry Solutions Function Tailored solutions Use case focused solutions General Purpose models Multimodal LLMs have a larger addressable market opening up synergies opportunities. These models tackle a large market, but have limited defensibility due to an unclear GTM. Focusing on specific industries will allow for better GTM strategies & higher defensibility for specific use cases Commoditisation. Open-source models are already being trained on similar amounts of data than closed-source ones and are leveraging on similar transformers algorithms, hence drastically reducing margins for differentiation. New wave of diversification The market will rapidly mature and diversify as more pre-trained models emerge. New model designs will offer more choices for balancing size, transparency, versatility and performance.
  • 14. 13 Ourcompasstonavigatenew opportunitiesinthe layer application High Low Feature Product Fine tuning Coreoffering GenerativeAI integrations IroncladGenAI solutions Tech-undifferentiated product Plug-insolutions Pre-existing product that integrates generative Ai among their features. Offers a solid defensible product, targeted to specific industries and/or use cases Limited mid-long term defensibility, due to low barriers to entry for similar players. Brand and UX led differentiation. Add to the model more proprietary data Use Public available foundational models like ChatGPT Virtuousflywheel Companies that achieve success will be those that can create a virtuous flywheel cycle, where increased usage of their platform by users generates more data, which in turn is used to refine their models and deliver improved and personalised outcomes. Redocean. Many of the first waves of generative AI app companies getting into the market today are usually poorly performing on both of these two axis, mostly leveraging the emerging large foundation models and with a few-to-none fine-tuning process.
  • 15. 14 Dataprivacyisthemost pressingmacrorisk Copyright DataPrivacy Ethicalconcerns Machine-generated content is based on real data from real people, but who is the true author? l Fact or Fiction? Fake content is a challenge as misleading information can be easily created with generative AI. Privacy matters. Several regulatory challenges appear in terms of compliance. Investors beware. Italy’s temporary ban and Britain’s data watchdog warning highlight the importance of compliance when assessing GenAI companies. Concerns have been raised regarding potential biases in content generation & impacts on employment, warranting careful data selection and bias mitigation to avoid perpetuating societal issues. Stanford University. Generative AI: The power and promise of AI that creates [PDF] AI Multiple. Generative AI ethics: The key considerations for developers.
  • 16. 15 It's an AI talent war out there. The ability to attract, retain, and manage talent is make- or-break for companies. As the talent landscape gets trickier, nailing team dynamics becomes crucial for generative AI success! Talentshortage LackofProvenBusinessModel Uncertain business models, with no proven success stories, making it challenging to assess investment opportunities in the evolving landscape. m This situation adds uncertainty to investment decisions. DependenceonR&D Generative AI is a frontier that's constantly evolving, demanding investments in R&D to stay ahead. Investors need patience and a long-term perspective in this fast-paced landscape. It's all about idea execution for sustainable success! Lack of make it harder to assess single companies proven business models Stanford University. Generative AI: The power and promise of AI that creates [PDF] AI Multiple. Generative AI ethics: The key considerations for developers.
  • 17. 16 What's next? Let’s ask our crystal ball Cyberpunk Alexander Platz with Leonardo.ai & Stable Diffusion 2.0 Our World in Data. Artificial intelligence timelines. Sequoia Capital.. Generative AI: A creative new world. 2023 2025 2030 2033 2035 ??? Models still have limitations & rely on good human prompters. 3D and video generation still in their infancy. Models able to produce better final drafts than the average human. Video & 3D media are catching up. Improved memory and context awareness in AI leads to professional level results. Hyper personalisation & new workforce requirements are 2 important disruptors in the business world. Advancements in medical research enable tailored treatments for patients, potentially impacting human life expectancy. The Metaverse: Synthetic avatars are starting to take over our digital footprint. 90% 356 AI experts in 2022 predict that human-like AI will be achieved within the next 100 years. 50% say before 2061.
  • 18. Giddy Up Gen AI Style Cyberpunk Cowboy in the middle of the desert with Leonardo.ai