What Is the FDE Playbook for AI Startups? Bob McGrew Explains

TL;DR

The Forward Deployed Engineer model embeds a technical engineer with customers to close the gap between what a product does and what each customer needs. Bob McGrew explains why this Palantir-pioneered strategy is spreading among AI agent startups, with more than 100 YC startups hiring for the role after basically zero three years earlier. Read on to understand how FDEs support product discovery, valuable outcomes, and larger contracts.

Transcript

With AI agents, there is no incumbent product. And so that I think is why you're seeing the FTE model taking off because there's so much product discovery to do. You want to drive the contract size up. So you're doing more and more valuable work for this customer and also for future customers. The FD model effectively is doing things that don't sca... Read More

Key Insights

• The FDE model involves engineers working directly at customer sites to customize products, ensuring they meet specific customer needs.
• This model was pioneered by Palantir and is characterized by doing things that don't scale, but at scale.
• AI startups are increasingly adopting the FDE model due to the lack of incumbent products and the need for extensive product discovery.
• FDEs act as a bridge between the product team and the customer, enabling rapid iteration and customization.
• The FDE model focuses on delivering outcomes rather than merely deploying software, emphasizing value creation for customers.
• Product teams must generalize solutions developed by FDEs to serve multiple customers effectively.
• The success of the FDE model depends on the ability to drive up contract sizes by delivering more valuable work over time.
• Adoption of AI technologies is lagging behind capability advancements, creating opportunities for startups to bridge this gap.

Questions & Answers

Q: What is a Forward Deployed Engineer (FDE)?

A Forward Deployed Engineer is typically a technical engineer who works at the customer site. The FDE closes the gap between what the company’s product currently does and what the customer needs, adapting the software to deliver a valuable outcome.

Q: Why are AI startups adopting the FDE model?

AI agents have no incumbent product, so startups still have substantial product discovery to do. Working closely with customers helps them connect rapidly advancing AI capabilities with practical adoption and uncover valuable use cases.

Q: How does the FDE model work in practice?

A startup brings its existing product to a customer whose problem it may never have solved before. The FDE works with the product team to build the use case, adapt the software, and deliver an outcome that creates a large impact for that customer.

Q: How did Palantir develop the forward-deployed approach?

Palantir initially built software for the intelligence community but could not easily learn how spies worked. The team brought a demo to potential customers, recorded their requested changes, and repeatedly adapted the product based on direct feedback.

Q: How does the FDE model support product discovery?

FDEs work closely with customers to identify needs that the existing product does not yet address. They act as product-discovery agents by testing solutions, gathering feedback, and returning useful insights to the product team for further iteration.

Q: How does the FDE model drive larger contracts?

The goal is to perform increasingly valuable work for the current customer while creating value that can also benefit future customers. As FDEs solve more important problems and deliver stronger outcomes, the company can drive the contract size up.

Q: How can an FDE organization balance customization with scalability?

FDEs may create highly customized solutions for individual customers, but the product team must generalize useful work so it can serve multiple customers. The model therefore combines customer-specific execution with continuous development of a more repeatable product.

Q: What does “doing things that don’t scale at scale” mean in the FDE model?

It means maintaining deep, hands-on customer work instead of abandoning it once the company begins growing. FDEs repeatedly perform close customer discovery and customization while the broader organization turns successful solutions into capabilities that can help future customers.

Summary & Key Takeaways

• The Forward Deployed Engineer (FDE) model, pioneered by Palantir, involves engineers working directly with customers to customize solutions. This approach is gaining popularity among AI startups due to the need for deep product discovery and the absence of incumbent products. FDEs bridge the gap between existing products and customer needs, enabling rapid iteration and significant value delivery.

• In the FDE model, engineers act as product discovery agents, tailoring software to meet specific customer requirements. This strategy emphasizes delivering outcomes rather than just deploying software, focusing on creating significant value for customers. The model allows startups to drive larger contracts by continuously delivering more valuable work.

• AI startups are increasingly adopting the FDE model due to the rapid advancement of AI capabilities and the lack of existing products in the market. By working closely with customers, FDEs enable startups to bridge the gap between technological capabilities and practical adoption, creating significant opportunities for value creation and business growth.