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What's working for YC companies since the AI boom

jamesin.substack.com

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Re: What's working for YC companies since the AI boom

#71

Post by justinbaker84 »

neom wrote: post #58
A_D_E_P_T wrote: post #20

Do "AI Startups" even make sense? There appears to be a pattern. Unmet need is identified: "I want ChatGPT -- but able to read PDFs" or "I want ChatGPT -- but able to do research and produce lengthy reports." Startup gets funding for this and, if they're lucky, releases a rough beta that leans heavily on the OpenAI API. Two months later OpenAI launches a better, much more polished and seamless version, which is integ…

I sit on an AI evaluation committee for a huge law firm (It's just a regular old consulting gig) - we get so much inbound from (mostly kids) folks trying to build wrappers for some aspect of legal workflow, but behind the scenes thomson reuters is slowly adding everything they're going to need to software they have been using for 10 years now.

Can confirm. One of my best friends is a senior engineer at thomson reuters and they are focused on that.

Re: What's working for YC companies since the AI boom

#72

Post by ck_one »

neom wrote: post #58
A_D_E_P_T wrote: post #20

Do "AI Startups" even make sense? There appears to be a pattern. Unmet need is identified: "I want ChatGPT -- but able to read PDFs" or "I want ChatGPT -- but able to do research and produce lengthy reports." Startup gets funding for this and, if they're lucky, releases a rough beta that leans heavily on the OpenAI API. Two months later OpenAI launches a better, much more polished and seamless version, which is integ…

I sit on an AI evaluation committee for a huge law firm (It's just a regular old consulting gig) - we get so much inbound from (mostly kids) folks trying to build wrappers for some aspect of legal workflow, but behind the scenes thomson reuters is slowly adding everything they're going to need to software they have been using for 10 years now.

In many fields there is no moat. It’s an execution battle and it comes down to question: can the startup innovate faster and get to the customers or can the incumbent defend its existing distribution well enough.

Microsoft owns GitHub and VSCode yet cursor was able to out execute them. Legora is moving very quickly in the legal space. Not clear yet who will win.

Re: What's working for YC companies since the AI boom

#73

Post by skydhash »

btown wrote: post #62
keiferski wrote: post #25

Earlier quoted context omitted.

Yes, they do, because ultimately software UI is what gets regular people to use things. To a technical user there may be little/no difference to you between prompt engineering into a chat box vs. clicking a button with premade text slots. But to the average non-programmer, a chat app like ChatGPT is somewhat pigeonholed into the chat format, and so use cases that don’t lend themselves to this interface will be outcom…

We should never forget the infamous 2007 Dropbox comment! https://news.ycombinator.com/item?id=9224

The exchange was quite nice and thoughtful compared to the usual AI conversations we have on this site.

  - This is the best AI tool ever!

  - Does it fix the reliability issue?

  - Not now, but wait 6 months, because that’s when better models will be coming out
And so since ChatGPT came out.

Re: What's working for YC companies since the AI boom

#74

Post by xorcist »

I see a pattern with AI companies. They always try to solve a really hard and not very useful problem. It's the same as with self driving car companies ten years ago: If you believe self driving tech is ripe for commercialization, the reasonable thing to do is something capital intensive and a special case where the technology most likely to succeed. For instance, heavy trucks automatically following others in formations for long drives. Saves gas, money, and potentially personnel.

There is a clear business case and buying large trucks is already a capex play. Then slowly work your way through more complex logistic problems from there. But no! The idea to sell was clearly the general problem including small cars that drive children to school through a suburban ice storm with lots of cyclists. Because that's clearly where the money is?

It's the same with AI. The consumer case is clearly there, people are easily impressed by it, and it is a given that consumers would pay to use it in products such as Illustrator, Logic Pro, modelling software etc. Maybe yet another try in radiology image processing, the death trap of startups for many decades now, but where there is obvious potential. But no! We want to design general purpose software -- in general purpose high level languages intended for human consumption! -- not even generating IR directly or running the model itself interactively.

If the technology really was good enough to do this type of work, why not find a specialized area with a few players limited by capex? Perhaps design a new competitive CPU? That's something we already have both specifications and tests for, and should be something a computer could do better than human. If an LLM could do a decent job there, it would easily be a billion dollar business. But no, let's write Python code and web apps!

Re: What's working for YC companies since the AI boom

#75

Post by parsabg »

Good analysis. Would it make sense to look at cumulative capital raised in addition to whether the companies have raised a Series A, to account for large seed rounds which don't seem uncommon with this cohort of companies? Series A as a milestone could obscure some details, e.g. company has raised a small seed round previously so the next round is labelled as series A, or company has raised a large seed round so doesn't need a series A within 24 months.

Re: What's working for YC companies since the AI boom

#76

Post by BoorishBears »

lubujackson wrote: post #4

0 consumer products is wild. I know SaaS has taken over from a bang for buck perspective, but this seens like a too-narrow approach by YC.

How is it YC's fault the consumer apps failed to raise a Series A?

I personally have a consumer AI product that had 3 competitors get into YC, and they just didn't perform very well:

- One has so little distribution the only sign of life in the last 3 months was that they updated their landing page.

- Another released a disappointing app, didn't really iterate on it, and eventually pivoted into being a legal AI answering machine after that flopped.

- The third took down their app shortly after YC and pivoted to a content creation site for YT channels... then randomly let their site start going down, ignoring the customers, and doesn't seem to be doing anything anymore.

Meanwhile some competitors that didn't get into YC are now at 7 figure MRR (I'm at a measly 5 figure MRR). So it's not like the space these apps were in is as disastrous as these comments are making them out to be: YC took a chance and unfortunately these teams just weren't the right teams.

Re: What's working for YC companies since the AI boom

#77

Post by mattbrewsbytes »

OtherShrezzing wrote: post #44
simianwords wrote: post #22

Earlier quoted context omitted.

Its a good point and it comes back to why Google can't take up projects that other startups are working on. Google has all the technical infrastructure, talent and everything to make something like AirBnB, Docusign and hell even intellij. Why not?

Because of a mix of comparative advantage and opportunity cost. Google as an entity absolutely dwarfs those other companies, and competes at that scale. Airbnb’s annual revenues are lower than Googles annual r&d spend. Google’s “wins” need to move the needle on a $2tn valuation, and an Airbnb size win doesn’t do that.

This is also the case in the past with companies like Xerox and why didn't they do X with Y that came out of PARC.

There's only so much product bandwidth a company can take on that makes sense, look at the graveyard of Google products.

Re: What's working for YC companies since the AI boom

#78

Post by yua_mikami »

ai-christianson wrote: post #61
bgnn wrote: post #57

Earlier quoted context omitted.

That's often potential customers. It's common to have other HW companies invest in HW start ups. Unfortunately there are not many good VCs for HW development. Even the ones marketing themselves as much don't like the meager returns in 5 to 10 years.

Might be a ridiculous question (I'm a software guy,) but is it at all possible to go the other way and increase the velocity of shipping and iterating on hardware to make it fit into the standard VC timelines?

I guess the problem is that you can't just ship updates over the Internet unlike software/apps, hence recalls for physical products.

Re: What's working for YC companies since the AI boom

#79

Post by dpflan »

xorcist wrote: post #74

I see a pattern with AI companies. They always try to solve a really hard and not very useful problem. It's the same as with self driving car companies ten years ago: If you believe self driving tech is ripe for commercialization, the reasonable thing to do is something capital intensive and a special case where the technology most likely to succeed. For instance, heavy trucks automatically following others in format…

AI allows for exquisite demos, demos that tantalize the audience into thinking of the infinite potential of the technology, that stunning vision expands and expands until the universe of potential overwhelms the dreamer into a state of terminal fantasy. So it is always a solution looking for a problem. There are cases where the two meet more realistically and a valuable impactful company develops it.

Re: What's working for YC companies since the AI boom

#80

Post by throwaway12345t »

Karrot_Kream wrote: post #19

I'm curious how many startups started making revenue after Seed and decided to defer an A round. I've had a couple companies reach out to ke claiming that they're close to breaking even at Seed, but I have my doubts.

more common than ever before, my 4 closest batchmates are each at 1.5 - 4m ARR and still only taken a seed. i think all but one are cfp as well so unclear what raising more gets them. And all teams under ~15
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