What do we do once AI replaces most startup costs?

A handful of laid-off tech friends are bootstrapping with AI and I'm hearing some say they will never need financing.

This bell won't be unrung. SHV threw a quarter-billion dollars at self-improving AI for software development and dozens of other companies are rolling out autonomous coders that can perform economically viable tasks on UpWork. We can create and run marketing campaigns, product management, and feature development at our portco's with 1099's all of a sudden. You can build a simple iPhone app without typing a single line of code. It seems like someone who is moderately technically proficient and knows which AI tool to use can replace the work of 2-3 legacy employees even with the very crude solutions on the market today. And if US employees are too expensive for what work remains, there are a billion people overseas who can get 80%+ of the job done at 10% of the cost.

What do we bring to the table once these models get good/cheap enough to cover the big three operational areas without needing our money? Besides writing a check, we are meant to be advisors and pattern recognizers, but computers already do a better job at the latter and are being trained to accomplish the former.

Interested to see where people think our roles heads a few years down the road.

 

I have been saying this for 24 months now in my colleague group.  I come out of the founder side of the world, Proptech and fintech, in addition to my RE and PE stuff.  I have been saying that this AI revolution is going to most impact the VC space.  This is also partly why I think that so many VC funds were deploying huge capital checks into the big AI companies to buy compute nodes with.  They can then use that to leverage startups to force cash on them.  

My PE fund is exploring VC investments and we are looking at writing 250K - 500K checks into thousands of companies.  We think that many of these companies might only need 1M - 5M in total funding to get PMF and profitability. 

 
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Can you explain your thinking? I don’t understand exactly how they will do everything with generative AI that will mean they never need to burn. Think about all the S&M dollars for example. You really think synthesia is going to replace salespeople? Forethought replace CX etc.? I say this as someone coming from working at one of the major foundation model vendors. I just don’t see what you see - how will this happen?
 

this message comes across sounding a little bellicose as I’ve had a few drinks but I say all this with earnest curiosity and deference to what you see and general open mindedness 
 

anyway the main problem with your strategy as a former VC bro is the power law game only works when you double down on your winners and so parsing through a thousand cos to decide whether to reup (which is often harder and worse decision making bias than initial investment) will be literally impossible. And if the logic is they won’t need the capital operationally then I think they will competitively because scaling becomes faster due to AI so market penetration is the name of the game. And if that’s true holy fuck were basically pressing fast forward on company building which I think is tough due to market absorption rates of new tech. Interesting stuff though.

 

There will always be major capital allocation needs.  I agree that many positions can't be automated.  But having been in the C suite at a start up I can tell you that sales is not the biggest expense driver for a tech company.  Engineering is.  Much of the spend of early stage capital goes into understanding, developing, and testing for PMF.  If you can cut the number of developers you need from 10 to 2 you can cut like 65 - 70% of the spend a company at this stage will do.  In addition you can potentially accelerate the timeline to discover PMF by rapidly reducing the time between iterations of the product.  This won't impact the pain point discovery timeline but if you can cut the cost of iterative development by 80% you can radically change the funding structure of how the VC funding framework operates. 

 

Yea that's clever. So the idea you have in mind is mainly the code gen tools like Codium Codeium Cursor etc. for the PMF finding phase and then engineering scaling so moreso lower capital costs on R&D side. And then maybe some margin uplift or decreased costs or greater firepower (depending on how you see the role of gen AI) on S&M / G&A later on when that's more relevant. Is that a fair summary of the view? I can see that.

 

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