Parker Conrad, founder of Rippling, an HR startup valued at $13.5 billion, recently appeared on our Found podcast and shared some interesting thoughts on AI.
“Nobody really wants to chat with HR software outside of the novelty of, 'Oh my gosh, it responds to me,'” he said.
He also believes that too many software companies are adding novelty AI features to their products that don't provide much use.
“There's a lot of stuff in the AI world that's really intangible,” Conrad said. “I'm not saying AI isn't transformative. There are a lot of really important capabilities. I'm just not impressed with a lot of the capabilities that I've seen.”
Still, it's understandable why companies have engaged in AI-washing — claiming their products are AI or using AI effectively when in fact they aren't. Right now, in the desperate scramble to harness AI, the entire tech industry wants to “sprinkle AI magic dust” on all of their products, he said.
“They say, 'If I'm a SaaS company, I'm at a 7x multiple, but if I change my name to what it was before (.ai), I'm at a 50x multiple,'” he said, referring to how investors value startups by multiples of revenue.
He's not necessarily wrong. According to PitchBook, AI companies accounted for 41% of all U.S. deal value in the first half of this year alone. AI and machine learning companies specifically raised $38.6 billion of the $93.4 billion invested in U.S. startups in the first half of this year. Additionally, more than 40% of all new unicorns are AI startups. AI companies raised $27 billion last year, much of which was driven by big tech companies pouring money into GenAI startups, the Financial Times reported.
“AI touches nearly every aspect of our lives,” says Nekeshia Woods, managing partner at Parkway Venture Capital, an AI-focused firm. Her perspective is one common in Silicon Valley right now. She sees AI quickly becoming a way for companies to automate mundane tasks. Next will be AI assistants, and in the not-too-distant future, general-purpose robots. “From a consumer perspective, engagement and demand will be focused on high-quality products and services that can be hyper-personalized to make better use of time, like some kind of self-driving car,” she continued.
All of this shows how unusual it is for Conrad to be so openly skeptical. As he has said before, he's unconvinced about the value of AI agents, but he believes AI will be powerful not because it can write, but because it can read. That means it can absorb large amounts of unstructured information, helping companies better understand their businesses, he said.
“This solves the problem of these things only being probabilistically true, not deterministically true,” he said of current AI models. “That's fine in a world where the system can flag anomalies to managers and they can decide, 'I don't have time this month to comb through everything in the company, but if I'm only going to look at five things, these are the five I need to look at.'”
There's no doubt that AI-washing (or, for some, doomsday thinking) will get tiresome, and the result will become known as AI fatigue, though Woods disagrees with the term.
“I think it's less a case of fatigue and more a question that people are starting to ask about AI,” says Woods, who, like Conrad and others, wants to know when big investments in AI will pay off.
“It's kind of hard to see from here,” Conrad said.
