AI startups: Sell work, not software

Product

• Fewer jobs-to-be-done. Focus on just 1-2 jobs-to-be done that are shared by many clients. The more jobs, the harder to productize. You can always expand.


• Scalable access. Find and tap into high-quality talent channels. Mechanical Orchard did this with the Pivotal Labs network (CEO Rob Mee used to run that company). Where’s your leg up?


• Piggyb

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Service firms are hired for two reasons:

• Do a job that the client doesn’t have the bandwidth or expertise to do.


• Offer third-party expertise in decisions (cynically, to cover the client’s a**.)

That execution-oriented first bucket tends to include IT implementations (like cloud migration projects), financial audits, and outsourced customer support – ... See more

The primary opportunity for startups is not to replace incumbent software companies—it’s to go after automatable pools of work.

Workflow+model startups will win by combining a fine-tuned model with deep customer insight to build an AI-native workflow. These startups will be particularly well-positioned to win in one of the following 3 scenarios:

1. Incumbent saas players do not have legacy workflow dominance in that vertical


2. An AI-native workflow solves the most critical creativ

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First, AI agents are likely to lead to new go-to-market strategies for SaaS companies. With potentially fewer humans in the loop, there is likely to be a further decoupling of seats/users and contract value. To capture value, LLM applications will need a new scaling factor for pricing: variable value-based pricing is a plausible solution.

Moreover, ... See more

However, we have noticed in many cases that AI companies simply don’t have the same economic construction as software businesses. At times, they can even look more like traditional services companies. In particular, many AI companies have:

With Generative AI’s budding reasoning capabilities, a new class of agentic applications is starting to emerge.

What shape do these application layer companies take? Interestingly, these companies look different than their cloud predecessors:

• Cloud companies targeted the software profit pool. AI companies target the services profit pool.


• Cloud compa

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