Investing in Arcee.ai — The future of Specialized Models

The AI space underwent a significant transformation last year, particularly with the introduction of advanced LLMs such as GPT-4 and LLAMA. These developments provided a glimpse into the vast capabilities of AI models, catalyzing a surge in interest across various industries. However, companies soon recognized the limitations of these models in meeting their specific needs and requirements. As we spoke with different companies, we realized there is a lack of trust in closed-source AI APIs and concerns about security and reliability when using open-source models. There was a clear preference for solutions that ensure their data remains within their own ecosystem and are efficiently optimized for their industry-specific needs.

Given the previously mentioned limitations, we at Flybridge believe in a future where there will be multiple models, in which Small Specialized Language Models (SSLMs) will play a pivotal role and represent the next phase in the AI ecosystem evolution. The shift towards SSLMs is driven by a growing need for precision, privacy, and customization in AI applications. SSLMs are not only efficient and cost-effective but also tailored to the particular needs of specific sectors. These models offer high-quality, domain-specific knowledge and performance with greater adaptability and privacy.

Amid this transformative phase in AI, I am excited to announce our investment in Arcee, founded by former Hugging Face engineers Mark McQuade and Brian Benedict, along with Jacob Salowetz, former head of ML at Roboflow. I got to know Brian while he was the head of sales at another one of my Flybridge portfolio companies a few years back. It was clear, at the time, that he had an unbelievable understanding of enterprise sales and what drives leaders at the Fortune 1000 to make decisions when it comes to technology solutions. So when Brian reached out to share what he and his co-founders were building at Arcee, I got excited and lept at the opportunity to learn more.

Brian and I talked shortly after they launched their first product to a handful of enterprise customers and we quickly moved into diligence mode and decided to back Mark, Brian, Jacob, and the rest of the Arcee team right before the beginning of this year. Arcee was born to bring trust to enterprise AI use, stemming from a keen understanding of the industry’s trajectory. We engaged with various people who are familiar with the team, their customers, and the industry, and the feedback regarding their technical knowledge and knowledge of the market was overwhelmingly positive. The team’s ability to attract top-tier talent from the outset is a strong testament of their exceptional leadership skills and compelling vision.

Arcee developed an SLM adaptation system that offers a comprehensive end-to-end platform for training, deploying, and monitoring SLMs. This platform removes many complexities, such as fine-tuning, and infrastructure setup. Arcee is able to build trust by allowing companies to host models in their Virtual Private Cloud (VPC) from pre-training to post-development, ensuring that the data never leaves the organization. These models are not just more secure, but can also be up to 50% less expensive to train than a general-purpose model. The greatest advantage is that this reduction in size and cost does not come at the expense of reduced performance. Since they are tailored for a particular need, they can be even more effective. For example, Arcee has an end-to-end US patent domain-trained model which showed a 50% improvement in retrieval over baseline models. All of this gives companies higher ownership, control, and customization over their models, and avoids vendor lock-ins. We expect this will massively drive enterprise adoption that has been lagging in recent years.

Arcee.ai Founders

Our investment in Arcee.ai is a testament to our belief in the transformative potential of SLMs. As the AI landscape continues to evolve, we are confident that Arcee’s innovative approach will pave the way for future advancements in the AI space. With their solid foundation, clear vision, and proven expertise, Arcee is set to make a significant impact in accelerating enterprise adoption. We are thrilled to be part of this exciting journey with the whole Arcee team.

(A special thanks to Daniel Porras Reyes, from Flybridge, for his help in diligencing this deal over the holiday break in the US!)