Procreate CEO James Cuda has issued a stark warning to aspiring app developers: the “gold rush is kind of over” for traditional app funding as venture capital increasingly flows toward AI startups. In an interview with Business Insider, Cuda discussed the dramatic shift in the app development landscape and offered strategic advice for founders looking to compete in today’s market.
The CEO of the popular digital art app for iPads and iPhones explained that the days of VCs freely investing in App Store developers have largely disappeared. “I think 10 years ago, lots of VCs were just throwing money at the App Store and any developer was getting a lot of funding,” Cuda said. “But that’s really dried up now.”
The numbers tell a compelling story: According to PitchBook data, 35.5% of VC deals in Q3 were AI and machine learning-related, while 64.4% were non-AI investments. This represents a dramatic 25% increase from Q1 2019, when only 10% of VC deals involved AI and machine learning. Major firms like Andreessen Horowitz have made AI one of their primary investment focuses, even as the broader startup market faces a funding lull.
Despite these challenges, Cuda believes there’s still opportunity for innovative app creators. His advice? “Take a bold risk” and create something entirely unprecedented. “What I would suggest is doing something that has never been done before,” Cuda explained, acknowledging that while this path carries more risk, the potential rewards are significantly greater.
Cuda specifically warned against following trends, arguing that founders “are not going to break through” the competition of well-established products dominating app stores. Interestingly, Procreate itself has practiced this philosophy by taking a controversial stance against generative AI. The company went viral in August when Cuda posted a video speaking out against incorporating AI into their products—a decision they’ve maintained despite AI’s popularity.
Cuda cited Uber as the ideal example of his philosophy, noting how the ride-hailing concept seemed “absurd” at inception but revolutionized transportation. The company, which went public in 2019, reported over $11 billion in Q3 revenue, demonstrating the potential rewards of truly innovative thinking. “Look at what impact Uber was able to make by doing something completely different and utilizing all of the technology of the hardware that Apple provides and the app store itself,” Cuda concluded.
Key Quotes
I think 10 years ago, lots of VCs were just throwing money at the App Store and any developer was getting a lot of funding. But that’s really dried up now.
Procreate CEO James Cuda describes the dramatic shift in venture capital funding for app developers, highlighting how the easy money era has ended as investors pivot toward AI startups.
What I would suggest is doing something that has never been done before.
Cuda’s core advice to app founders emphasizes innovation over trend-following, suggesting that only truly unprecedented concepts can break through today’s competitive app marketplace dominated by established players.
If you follow trends, you’re already going to be competing against products that are really dominating in those charts, have got lots of eyeballs, they’ve got lots of brand equity already accrued.
The CEO warns against chasing popular trends, explaining why this strategy fails in a mature app market where incumbents have significant advantages in visibility and brand recognition.
But look at what impact Uber was able to make by doing something completely different and utilizing all of the technology of the hardware that Apple provides and the app store itself.
Cuda uses Uber’s success story as an example of his philosophy, demonstrating how a concept that initially seemed absurd became an $11 billion revenue generator by taking a bold, unprecedented approach.
Our Take
Cuda’s perspective reveals an interesting paradox in today’s tech ecosystem: while AI dominates investment conversations, success may actually lie in strategic differentiation rather than AI adoption. Procreate’s anti-AI stance has become a competitive advantage, resonating with artists concerned about generative AI’s impact on creative work.
The 35.5% AI funding concentration suggests we’re witnessing a classic investment bubble pattern, where capital floods into a single sector regardless of individual merit. History shows these concentrations eventually correct, potentially creating opportunities for non-AI innovators who’ve built sustainable businesses without chasing trends.
What’s particularly noteworthy is Cuda’s emphasis on platform-native innovation—using Apple’s hardware and App Store infrastructure in novel ways. This suggests the next breakthrough apps won’t just be AI wrappers, but products that fundamentally reimagine what mobile devices can do. For founders, the message is clear: authentic innovation trumps trend-following, even when that trend is as powerful as AI.
Why This Matters
This story highlights a critical shift in the tech investment landscape where AI startups are increasingly dominating venture capital funding at the expense of traditional app development. The 25% increase in AI-related VC deals since 2019 demonstrates how rapidly the industry is consolidating around artificial intelligence technologies.
For app developers and entrepreneurs, this represents both a challenge and a strategic inflection point. The drying up of traditional app funding means founders must either pivot toward AI integration or find truly innovative niches that can compete without substantial VC backing. Procreate’s decision to actively reject AI integration while still maintaining market leadership offers an alternative playbook—one that prioritizes brand differentiation over trend-following.
The broader implication is that the app economy is maturing, with established players holding significant advantages and new entrants facing higher barriers to entry. This consolidation mirrors patterns seen in other tech sectors and suggests that the next generation of successful apps will need to be either AI-powered or offer genuinely revolutionary functionality that can’t be easily replicated by incumbents.
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Source: https://www.businessinsider.com/procreate-ceo-advice-app-founders-vc-funding-dried-up-2024-11