PodcastsThis Week in StartupsBenchmark's Sarah Tavel on the state of VC, AI's impact on startups & more! | E1813

Benchmark's Sarah Tavel on the state of VC, AI's impact on startups & more! | E1813
This Week in StartupsWed Sep 20 2023
The State of VC and the Challenges for Founders:
- Over the past few years, founders have faced numerous challenges in addition to the traditional ups and downs of the startup world.
- Factors such as a zero rate environment, progressive movements, and events like the Silicon Valley bank issue have added complexity to running a startup.
- Founders need resilience and adaptability to navigate these challenges.
The Role of Large Language Models (LLMs) in Startups:
- LLMs, such as ChatGPT 3.5, have had a significant impact on startups within a short period.
- The ability of LLMs to generate text has transformed various industries and applications.
- Startups can leverage LLMs to create innovative solutions that were previously not possible.
Competitiveness as a Key Trait for Founders:
- Competitive spirit is rare but essential for success in entrepreneurship.
- It drives founders to go above and beyond, pushing them to achieve their goals even when faced with obstacles.
- A competitive mindset is often developed early in life through personal experiences or upbringing.
Writing as a Tool for Clarity of Thought:
- Writing helps clarify thoughts and ideas by forcing individuals to articulate their thinking in written form.
- It allows for deeper learning and exploration of concepts while providing an outlet for self-expression.
- Writing also fosters connection with readers who resonate with the content, creating a community around shared interests.
Expanding Beyond Productivity-Focused Applications:
- Many startups leveraging LLMs have focused on increasing productivity through software tools targeting specific tasks or job roles.
- However, this approach puts them at risk of being outcompeted by incumbents who can easily integrate similar functionality into their existing products.
- Startups must identify work products or processes that can be fully automated using LLMs, offering unique value propositions separate from incumbent offerings.
Even Up's Approach: Selling Work Products Instead of Software Tools:
- Even Up, a personal injury demand letter automation startup, offers a different go-to-market strategy.
- Rather than selling software tools to increase productivity, they sell the actual work product (demand letters) on a per-demand basis.
- This pricing model reflects the significant efficiency gains achieved by automating the creation of demand letters.
The Paradigm Shift Enabled by LLMs:
- LLMs have brought about a paradigm shift in how startups can leverage AI technology.
- By identifying and capitalizing on new use cases and business models made possible by LLMs, startups can differentiate themselves from incumbents and create enduring value.
Personal Injury Lawyers and Work Product:
- Personal injury lawyers often struggle to find time in their busy schedules to complete work tasks.
- The podcast hosts offer a service that can help personal injury lawyers complete their work product for a fee.
- The service charges a percentage of the cost rather than charging per seat, making it more affordable for busy lawyers.
AI Impact on Repetitive Jobs:
- AI technology can be used to automate repetitive tasks in jobs such as sales development representatives (SDRs).
- Lead IQ is a company mentioned in the podcast that uses AI to automate lead generation and warming up leads for SDRs.
- The hosts suggest that businesses should consider new business models that leverage AI technology to optimize efficiency in repetitive jobs.
Selling Work Product Instead of Software:
- The hosts discuss how selling work product instead of software can open up new markets for companies.
- They use the example of personal injury lawyers who sell their services instead of software products.
- By changing the product being sold, companies can tap into markets that may not have been viable for traditional software companies.
Startups Needing Less Money:
- The hosts discuss the idea that startups may need less money to achieve their goals compared to previous years.
- They mention that cloud computing has lowered the cost of infrastructure for startups, reducing the need for large investments in servers.
- However, they also note that some AI companies still require significant investment due to the complexity and cost associated with training language models.
Average Round Size and Competition:
- The average round size for startups has increased over time, driven by more competition among venture capitalists with larger funds.
- While some AI companies may require substantial investment, overall trends show an increase in round sizes across different industries.