In the Line of Fire

AI’s rapid rise is wiping out start-ups that once seemed promising. Investors now demand business moats and metrics that can withstand Al disruption

- • Nabodita Ganguly

InStoried once looked like a sure bet.

Founded in 2019, the content-marketing startup raised $20.7mn over 14 funding rounds and was backed by early-stage venture-capital funds such as 9Unicorns and Venture Catalysts. Its promise was blending emotional intelligence with AI-driven content recommendations.

Then came OpenAI.

By late 2023, nearly a year after ChatGPT's public debut, InStoried cofounder Shamin Ali had to admit the uncomfortable truth. "AI has leapfrogged more in one year than it had in the previous decade."

What had been a niche platform was suddenly competing with a free and widely accessible tool. InStoried tried innovating, layering emotional analysis and other features on top of their AI, but the gap only widened.

When Abhi (name changed), a veteran teacher on a major ed-tech platform, launched his own startup offering small-batch classes and competitive exam prep, it began with a bang. Students were eager to join, parents trusted him and his YouTube channel hit 14,000 subscribers in no time.

But engagement plateaued after AI chatbots entered the picture. Suddenly, investors weren't interested in talking about funding anymore. The foundation of his model, human-delivered long-form lessons, was “obsolete”, they said.

As AI lowers the incremental cost of content production to nearly zero and seemingly erases barriers to entry, startups in sectors where content is the backbone are the first to take the hit. Investors aren't looking to back companies or double down on existing portfolio startups in areas like edtech, storytelling platforms or marketing.

“You don’t even need physical studios or expensive setups anymore. It’s becoming cheaper and more accessible, which means anyone can create content at scale,” says Anirudh Damani, founder, Artha Ventures, a micro-venture-capital (VC) fund.