When OpenAI launched ChatGPT in Nov 2022, access to AI (generative AI to be specific) was democratized. There were similar solutions before ChatGPT that were too complex to integrate. But ChatGPT was the first to make the integration so simple. Another master stroke of OpenAI was making the compute so cheap to use ChatGPT. ChatGPT's algorithm itself is closed sourced.

There are two kinds of AI startups exist today:

• Startups that invent/train foundational models
• Startups that apply somone else' foundational models for a specific use case

If you look at the AI startup eco system today, most of the start ups are in second category. They didn't invent or improvise the models, but they just use them. The only moat these startups have is the model built on top of ChatGPT using the startup's proprietary training data (if they have any). Without that data moat, there is no differentiator as underlying model is the same across those startups. If a start up doesn't have the data moat, it will be easily replaced.

If you are going to join or invest in an AI startup, the most important question you need to ask is if they have the data moat. If they don't, they may not survive long.