Summary:
AI startups are often criticized for being 'thin wrappers' built on top of foundational models from companies like OpenAI.
However, being a thin wrapper at the start is often necessary for getting a product off the ground, and startups can differentiate themselves by adding value through design, user interface, features, services, and branding.
While AI technology makes it easier to build 'good enough' products, building truly great products that solve real problems and delight users is still incredibly hard, giving AI startups a chance to thrive by focusing on the details that matter.
Startups have always succeeded by focusing on niche problems that incumbents don't prioritize, and this principle still holds true in the AI world. AI startups can build strong positions by focusing on specific problems and delivering tailored solutions.
AI startups should focus on delivering value, focusing on the details, and building a product that truly solves a specific problem for users, rather than simply competing on technology alone.
AI Startups: Are They Doomed? Not So Fast! š¤Æ
The AI world is buzzing with talk of OpenAI's dominance and the potential demise of AI startups. But is this hype justified? One AI startup founder argues that the future for AI startups is actually bright, and here's why:
1. Thin Wrappers: A Necessary Starting Point
Many AI startups are built on top of foundational models like those from OpenAI, leading to accusations of being 'thin wrappers.' While some might get steamrolled by future advancements, being a thin wrapper at the start is often necessary for getting off the ground. The key is to evolve from thin to thick over time by adding value through design, user interface, features, services, and branding.
Think of companies like Salesforce, Box, Zoom, and even Delta - they all started as thin wrappers over existing technologies but built their success by adding unique value.
2. The Difference Between Good and Great Is Infinite
AI technology is democratizing product development, making it easier to create 'good enough' products. However, building truly great products that delight users and solve problems is still incredibly hard. This is where AI startups can thrive by focusing on the details that differentiate them from the competition.
Compare Google's 'AI overviews' to the popular AI search startup Perplexity. Both use LLMs, but Perplexity excels due to its user-friendly interface, rapid response times, and attention to detail. This showcases the importance of going beyond basic functionality and focusing on delivering a truly exceptional user experience.
3. Specialization Matters: Finding Your Niche
Startups have always succeeded by focusing on niche problems that incumbents don't prioritize. This allows startups to innovate and build strong positions before eventually expanding.
In the AI world, this principle still holds true. Even though OpenAI and other large players offer powerful foundational models, AI startups can carve out their niche by focusing on specific problems and delivering solutions tailored to their target audience.
As Nat Friedman, a renowned AI investor, puts it, āPeople hire a janitor service to clean their office. They donāt hire a generic labor service, even though itās basically the same thing.ā AI startups should focus on building specialized products that cater to specific needs, offering a level of expertise and trust that bigger players can't always replicate.
Ultimately, the future of AI startups isn't about being the first to market with the most advanced technology. It's about delivering value, focusing on the details, and building a product that truly solves a specific problem for users. This is a recipe for success that has worked for startups for decades and will continue to be relevant in the age of AI.
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