A new wave of developer tools are AI-powered and VC-backed

In early November Tabnine, an AI-powered code writer and competitor to GitHub Copilot, announced that it had raised $25m in Series B funding. For all the press and publicity that big tech companies like Microsoft and Google attract, it is a reminder that AI is still in its infancy. Startups are racing ahead with new and unexpected ways to add AI into every nook and cranny of software development — and venture capitalists are giving them the funding to do it.

Visual Studio Code is emerging as a hotbed for such AI innovation. Some startups provide user-friendly interfaces on top of large language models from companies like OpenAI and Anthropic directly inside the code editor. Other startups, such as Codeium, are training their own models or deploying open source ones with the hope that proprietary data and fine-tuning can make them more useful for developers. The vast majority of startups are focused on helping developers write code — dubbed AI copilots or companions for developers.

But there is a growing number of tools experimenting with other ways to use AI. Mintlify, Swimm, and Theneo are able to automatically write documentation to help teams understand how their codebase works. Other tools, like Sourcegraph's Cody AI, give developers the ability to query their company's codebase in plain English, similar to tapping a human colleague on the shoulder to ask for help. Serenade allows developers to write code with natural speech (they can simply talk to their computers to edit code or run commands in Visual Studio Code).

Despite the current boom, many venture capital firms are still trying to make sense of it all. Startups are popping up faster than firms can define their investment theses on the future of AI in software engineering. And with venture capital still reeling from frothy startup valuations in 2021 and 2022, formulating a viable investment strategy around AI can feel like a make or break moment for many funds.

Coatue, a tech-focused investor that has backed several AI companies including Runway and Jasper (both of which are unicorns), argues that "AI will change the development process so much it will be unrecognizable to today’s software teams." Exciting — and uncertain — times lie ahead.