First, someone has to develop those models and that's currently being done with VC backing. Second, running those models is still not profitable, even if you self host (obviously true because everything is self hosted eventually).

Burning VC money isn't a long term business model and unless your business is somehow both profitable on Llama 8b (or some such low power model) _and_ your secret sauce can't be easily duplicated, you're in for a rough ride.

The only barrier between AI startups at this point is access to the best models, and that's dependent on being able to run unprofitable models that spend someone else's money.

Investing in a startup that's basically just a clever prompt is gambling on the first mover's advantage because that's the only advantage they can have.