German AI hope bursts dreams
Heidelberg-based AI startup Aleph Alpha claims its language model can hold its own against ChatGPT. High hopes, but the hype has passed.
Before Heidelberg-based AI startup Aleph Alpha made headlines, no German company came close to competing with the leading US competitors. That changed in February last year.
At the time, founder Jonas Andrulis announced: Aleph Alpha's AI language model performed similarly well in a test as ChatGPT developer OpenAI's. With Luminous, the first European AI language model had landed on par with American tech giants, Andrulis stated.
Since then, Aleph Alpha has been considered a ChatGPT competitor. However, the startup from Heidelberg does not offer a mass-market product for individual consumers. The company's strategy focuses on solutions for industry and public administration. Moreover, the company promises data protection and security according to European standards, unlike ChatGPT, which aims to be incomprehensible and opaque.
"There's a certain longing in Europe for a company that can keep up with OpenAI," says AI expert Teo Phan in an interview with ntv.de. "Whoever takes it upon themselves to compete, opens doors for investors." Eventually, investors would be happy to invest in the next Super-Unicorn.
Behind the scenes, it's said: The technology is outdated
And indeed, in November 2023, Aleph Alpha raises one of the largest financing rounds of the year with approximately 500 million dollars. Among the investors were predominantly German companies, including the Lidl owner Dieter Schwarz, the software company SAP, and the industrial giant Bosch.
However, the initial euphoria gave way to disappointment. According to several media reports, many users have been less than satisfied with the quality of Aleph Alpha's language model. Phan confirms this. In the AI community, it's said that the technology is outdated.
Classic venture capital investors want to build a massive company - Aleph Alpha doesn't fit the bill. In the interest of Bosch, Lidl, and SAP, "solutions for themselves could come first," Phan speculates. So far, the startup has only cooperated closely with a few companies. "Ultimately, only they can say whether Aleph Alpha's product is a good solution."
The decision to focus on the industry and not the mass market had both advantages and disadvantages, according to Phan. The focus, however, also had a downside: Aleph Alpha cannot scale as strongly. "The demand for the model seems to be limited to a handful of companies. This not only negatively affects sales potential but also causes the model to learn much more slowly because it has to rely on fewer data."
Although it appears that Andrulis is falling short of expectations, the presentation of a new language model is also being delayed. Reportedly, Aleph Alpha was supposed to present a new version of its model Luminous in April. Andrulis admitted errors to Manager Magazin and expressed understanding for the frustration over the slow progress. At the same time, he expressed hope for a "product launch in a few weeks."
Instead of announcing new technological developments, Aleph Alpha recently made headlines with allegedly false information regarding its November funding round. The magazine "Capital" reported, citing the company's financial statement for 2023, that Aleph Alpha had only received around 100 million dollars instead of the publicly announced 500 million. The company has since denied these claims.
Time is pressing. Aleph Alpha is not only in competition with OpenAI but also with major players like Nvidia, Amazon, and Microsoft - they too are developing solutions for the industry. "Microsoft is becoming an increasingly big problem for the European and German AI scene," the US corporation has simply had a foot in the door for a long time. "The race for AI has already run its course for many companies," quotes "Manager Magazin" an industry expert.
The market is fiercely competitive. "If a AI startup can't establish itself now, it doesn't necessarily mean there's a major failure behind it. Even the most promising US startups with billions in investment had to bury their ambitions after just a year," says Phan.
Despite facing criticism about the outdated technology and user satisfaction with its language model, Aleph Alpha managed to secure a substantial investment of around 500 million dollars in November 2023. Notable investors included German companies such as Lidl owner Dieter Schwarz, software company SAP, and industrial giant Bosch.
Despite focusing on solutions for industry and public administration, Aleph Alpha's limited mass market product has contributed to its slow growth. The company's lack of scalability is due in part to its reliance on a limited number of companies for data and a seemingly limited demand for its model.
