The Future of AI Startups: Selling Work, not Software

The Future of AI Startups: Selling Work, not Software

In today's rapidly evolving world, technology has transformed the way we live and work. The rise of artificial intelligence (AI) has created new opportunities for startups to disrupt traditional industries and offer innovative solutions. However, the success of AI startups lies not in selling software, but in selling the work itself.

When AI startups sell work, they open up new vertical opportunities that were previously inaccessible to software companies. By focusing on selling outcomes rather than just productivity, these startups can tap into markets that wouldn't have otherwise supported a software-based approach. This shift in mindset allows for the customization and adaptation of AI technology to meet the specific needs of different industries.

Moreover, selling work changes the dynamics of the sales cycle. Instead of selling software as a productivity improver, the work is priced relative to the cost of a human performing the same tasks. This pricing strategy not only provides a tangible value proposition for potential clients but also helps to establish a clear return on investment. By aligning the cost of the work with the value it provides, AI startups can overcome the skepticism often associated with new technologies.

Furthermore, when selling work, AI startups face less competition from similar products. While software companies may have to compete with other software providers, selling work allows startups to leverage their own human capital and outsource certain tasks to internationally based groups. This effectively reduces the competitive landscape and allows AI startups to differentiate themselves based on the quality and efficiency of their work.

The concept of selling work is closely tied to the idea that software is eating the world. As technology continues to advance, it increases access to scarce resources by helping us do more with less. This abundance of resources leads to new forms of emergent scarcity that are difficult to predict. In a world of scarcity, supply constraints are crucial, but in a world of abundance, demand becomes the driving force.

Ben Thompson's aggregation theory perfectly captures this shift in dynamics. In the pre-internet era, profits were captured by controlling supply. However, in the post-internet era, profits are captured by aggregating demand. This unbundling and rebuilding process is happening in every industry influenced by software. Songs are unbundled from CDs and rebundled into playlists, while articles are unbundled from newspapers and rebundled into social media feeds. In this new landscape, curation becomes increasingly important.