AI: Startup Vs Incumbent Value

Earlier this year we met with our Limited Partners. Their top question was “will the AI transition destroy your existing cloud companies?”

We began with a strong default of “no.” The classic battle between startups and incumbents is a horse race between startups building distribution and incumbents building product. Can the young companies with coo... See more

Sobriety source #2: AI as the next platform shift. Every wave of new companies that transforms their respective industries is fueled by a major platform or technology shift. The advent of the web did this. The smartphone and mobile applications did this. And there is no doubt that AI is our next wave. But does every new wave always necessarily favo... See more

Disruption Theory & risk-aversion don’t apply

Incumbents typically cede market space to startups wherever there’s new, unproven technology or a new, unproven market, especially in spaces where they can’t use past data to predict the future. But in AI, they’re rushing to embrace new technology and uncertain markets, spending historic amounts of ... See more

However, a key risk with several of these startups is the potential lack of a long-term moat. It is difficult to read too much into it given the stage of these startups and the limited public information available but it’s not difficult to poke holes at their long term defensibility. For example:

• If a startup is built on the premise of taking base L

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There is obviously leverage in AI, but it's almost certainly going to go to the big platforms. This is not a PC or internet-level disruption. This is an easy bolt on for the cloud providers, or for the companies who already have attention or data. There are going to be exceptions. Someone is going to build a $10 billion company out of AI. There wil... See more