AI as a Force Multiplier
I am seeing many small to medium-scale generative AI applications with point solutions that have demonstrated decent revenue growth in the current market, eg. vertical chatbots, workflow automation, and more. One such example below.
The availability of open-source LLMs like ChatGPT makes it relatively easy to launch these services.
They may have an advantage by being first to market, but IMO this edge will likely erode in the medium to long run due to ease of entry. These companies will have to introduce new features that would increase customer retention, embed themselves into their customer’s workflows, start cross-selling to other personas, and so on to build long-term differentiation. And that can be hard when 100s of companies are trying to do the same.
I view AI as a force multiplier and don’t think it should be the end-all solution to the problem founders are solving. It should enhance the value prop of an existing service.
One way to think about AI is… AI should 10x the value of your product that is already providing 10x value. Applying AI over a product that is delivering incremental value won’t make your service any better.
My advice to these companies in these spaces is to focus on profitability and cash flow over venture financing and growth. Achieving a $1B-$10B outcome in any market, let alone a competitive one with loat moat, is challenging.
It is more prudent to build a sustainable cash-flow-oriented business. Keep your teams lean and your burn low. Retain your customers and reduce churn. You can then build adjacent features, gradually building a portfolio of generative AI tools over time.