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This is The Startup Breakdown, the newsletter where we learn, laugh, and love startups. By joining this growing community of hundreds of future startup aficionados (think i spelled that right?), you're getting a beachside view of the ocean that is the startup and VC scene. This ain’t your grandpa’s newsletter, so prepare yourself for an inbox full of 4/20 jokes and Succession references.

Happy Tuesday, folks.

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Eggnog: AI video creation with consistent character generation

The Story

If you were concerned that AI is going to take your job, fear not!

Not because your role won’t be automated because it will.

But now, AI is ensuring you never run out of shows to binge on Netflix in your newfound free time ;)

As noted in the bullets from Thursday’s newsletter (soft sell: if you didn’t get to read them, all you have to do is refer one new reader 😉), Y Combinator hosted its biannual Demo Day, showcasing the progress made from the 247 startups graduating from its most recent cohort.

Companies were obligated (not legally, though Garry Tan did hold a gun to their heads) to include AI in their deck, and 187 complied.

While there’s a very good chance that multiple of these companies ends up becoming one of the biggest companies in tech, one in particular stood out as the solution to the question you’ve all been wondering: What am I supposed to watch after finishing Love is Blind?

Eggnog isn’t just a beverage that you drink too much of and get sick while arguing over a young family member’s desire to quit school and live in a van during the holidays; it’s also the innovative startup solving the output quality and consistency problem that has been plaguing AI content generation with the first AI video creation tool with consistent character generation.

Users can sign up for free and create visually impressive characters through simple natural language description which are then shared with the broader Eggnog community.

Then, this set character can be used to create video scenes which can also be built through text description, a process which understandably takes a phat minute now but is sure to become quicker and higher quality.

I gave it a shot, and my overall impression was that the repeat character generation tool is crazy cool and is already usable for projects like comics where static images will suffice.

The video production still has a long way to go, but given only OpenAI has seemingly managed to solve this with Sora, and it’s still too expensive for even them to release, it’s no surprise that a tiny cash-strapped company isn’t there yet.

In terms of distribution, the company benefits from network effects whereby characters are added to the public database of usable actors, providing use and inspiration for future characters, making the experience better for everyone as more people join the platform.

You can already go ahead and start exploring with the character I made…

And if you want to see the results of my own experimentation in video…

The Numbers

Traction

• Launched ~2 weeks ago, so veeeeeery early, but they’ve already seen their videos popping up on various social media sites, and this one from one of their founders racked up a quarter million views and got laughing emojis from Paul Graham and Marc Andreessen.

Market Potential

• The global video streaming market is projected to grow from $473B in 2022 to $1.69T by 2030.

• SAM = $1.58 billion

• SOM = $79.2 million

• And yes, they’re already planning on raising prices, cracking down on password sharing, and introducing ads

*If you wanna chat assumptions, reply and get my notes

Competition

• Sora

• Runway

• Synthesia

• Pika

• Deepbrain AI

Team

• Sam Plank, Cofounder: former data scientist at Facebook news feed and Quora creator monetization tools; Harvard Applied Math

• Jitesh Maiyuran, Cofounder: former PM at Flexport and consultant at McKinsey; BS and MEng in ML from MIT in CS

Obstacles

• This screams deepfake headaches.

  • There are no guardrails on character creation (or NSFW video generation…), and I don’t expect regulators or social media companies already struggling to contain these videos from wide(r)spread distribution on their platforms to be fans

• Video needs to improve.

  • Not super concerned about this given the pace of innovation in the space, but if the quality:cost ratio doesn’t continue to rapidly increase, there’s no way to feasibly produce these videos.

• Consumer attention spans.

  • Internet users are fickle beings, and the arms race for social media attention has melted our brains to the level of hamsters or goldfish. It’s impossible to fully predict what will catch on, no matter how compelling the product is.

Some initial thoughts and ideas for how they might expand?

• obviously improving video quality is the biggest potential improvement

• a leaderboard ranking characters by usage to incentivize creative, popular characters to be created

• community competitions to create the best scene with a chosen character

• a marketplace to watch a “series” about one character, potentially seeded by a few multi-episode projects put together by the Eggnog team

• long-term, while the tools themselves are extremely valuable, the real money is in the content, and if the video production system can reach the levels that many are hopeful they will eventually see, becoming the TikTok (or even Netflix) of AI-generated content offers massive potential

It was only a matter of time before AI took over video, too.

Great news for the studios who managed to retain the right to use “Synthetic Performers” in that long-drawn out SAG-AFTRA strike…

How am I doing?

I love hearing from readers, and I’m always looking for feedback. How am I doing with The Startup Breakdown? Is there anything you’d like to see more or less of? Which aspects of the newsletter do you like most?

Cheers to another day,

Trey