AI: The Changing Landscape for Startups and Incumbents

Hatched by Kazuki
Aug 25, 2023
4 min read
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AI: The Changing Landscape for Startups and Incumbents
The world of technology and innovation has seen various waves of disruption over the years. From the rise of the internet to the advent of mobile applications, startups and incumbents have battled for a share of the value created by these transformative technologies. However, when it comes to artificial intelligence (AI), the dynamics seem to be shifting.
In a recent tweet thread, the observation was made that the prior wave of value from AI largely went to incumbents, despite the significant activity in the startup space. This is in stark contrast to previous waves, such as the internet, where startups like Google, Amazon, and Facebook captured a significant portion of the value. So, what has changed in the AI landscape?
One possible explanation is the nature of the technology itself. In the early days of the internet, startups were able to build products that were dramatically better than what incumbents had to offer. This enabled them to overcome the distribution, capital, and pre-existing product moats of established players. However, in the field of AI, incumbents seem to have a data advantage that startups struggle to overcome.
But there is reason to believe that this trend is changing. As companies leverage the broader internet as an initial training set and switch to models that can work with smaller data sets, the data advantage enjoyed by incumbents may no longer be as significant. Startups now have an opportunity to build products that are 10 times better than what incumbents can offer, potentially disrupting established players in the process.
Furthermore, the current wave of AI innovation is characterized by the speed of progress across multiple areas. This time, the technology seems dramatically stronger, making it easier for startups to create breakthrough products. While GPT-3, one of the most advanced AI models to date, may not have sparked a wave of startups building big businesses on it yet, the next generation of models could change that. A 5-10 times better model than GPT-3 could give rise to a whole new ecosystem of startups, while also augmenting the products of incumbents.
Another significant development in the AI landscape is the emergence of infrastructure-centric companies with broad adoption and rapidly growing usage. Companies like OpenAI, Stability.AI, Hugging Face, and Weights and Biases are providing the tools and platforms that startups need to leverage AI effectively. This creates more opportunities for startups to access and leverage AI technologies, leveling the playing field to some extent.
However, it is essential for startups to avoid the trap of becoming a hammer looking for a nail. The key is to identify actual end user needs and unserved markets that can benefit from the capabilities of AI. By focusing on addressing genuine pain points and delivering valuable solutions, startups can position themselves for success.
Before concluding, let's take a step back from the world of AI and explore some actionable advice for entrepreneurs and innovators. Marvin Liao, an experienced professional in the startup ecosystem, shares valuable insights on how to sharpen your ax and thrive in the competitive landscape:
- 1. Have a Daily Routine and Stick to It: Success often comes from discipline and consistency. Establishing a daily routine and sticking to it can help you stay focused and productive, even in the face of challenges.
- 2. Practice Meditation: Successful individuals tend to incorporate meditation into their daily lives. Taking just a few minutes each day to meditate can help clear your mind, reduce stress, and enhance overall well-being.
- 3. Master the Art of Pitching: One of the most critical skills for any entrepreneur is the ability to tell compelling stories. Pitching is an art form that can make or break your startup. Learn how to craft persuasive narratives that captivate investors, customers, and partners.
In conclusion, the landscape for AI startups and incumbents is evolving. While incumbents have traditionally dominated the value created by AI, the current wave of innovation presents new opportunities for startups. With advancements in technology, infrastructure-centric companies, and a focus on addressing real user needs, startups have a chance to capture a more significant share of the AI-generated value. By staying disciplined, embracing meditation, and mastering the art of pitching, entrepreneurs can position themselves for success in this exciting and rapidly changing field.
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