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Benchmark's Sarah Tavel on the state of VC, AI's impact on startups & more! | E1813

This Week in Startups

Wed 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.