Qiao Wang: AI has fundamentally changed startup companies, and thinking ahead about competitive advantages is more important than product-market fit

Author: qw

Compiled by: TechFlow of DeepPool

Three years ago, when ChatGPT was just launched, I wrote a small program to help prioritize my emails and messages. Due to my rusty programming skills, I chose to use ChatGPT to assist with the coding work. At that time, I immediately felt the power of AI. This project only took me half a day, whereas in the pre-AI era, it might have taken several days to complete.

Over the next few years, the technical founders in Alliance cooperation gradually began to use various AI coding tools, such as Cursor. I once asked them, how much can these tools improve productivity? On average, it has increased by about 1.5 times, with some even claiming it can reach 2 times.

Just this week, I posed the same question to the latest members of Alliance. Their answers showed that productivity has increased by 2 to 4 times. This surprised me greatly. Not only because of the magnitude of the increase, but also because of the speed of progress—productivity has increased by 4 times in just three years, and this trend is continuing.

When I first used ChatGPT as an assistant, I vaguely felt that AI would forever change the rules of entrepreneurship. And now, I firmly believe this.

The cost of software development is rapidly approaching zero. But this is just the beginning. The costs in other business areas such as marketing, sales, customer service, and operations are also significantly decreasing. This change has already manifested in large companies. For startups that have not yet found product-market fit (PMF), the impact is relatively small for now because founders need to personally take charge of user acquisition and support to be closer to customers. However, for startups that have already found PMF, they are beginning to use AI to expand their business faster.

These changes have brought about obvious results: startups no longer need a large amount of funding and a huge team to grow rapidly. In other words, in the future, there may be more unicorn companies created by a few co-founders with less than $500,000 in funding. In fact, in recent years, we have seen more and more Alliance startups achieve annual revenue growth of millions or even tens of millions of dollars after receiving a small amount of seed funding from us and some angel investors. Their team size is usually less than 10-20 people, and they may never need to raise funds again.

This raises a question: if the cost of developing software and expanding business is so low now, what “moats” can companies rely on to maintain competitiveness?

Exclusive Data: Exclusive customer data or hard-to-obtain public datasets that can provide a competitive edge for businesses.

Network effect: Although it is theoretically possible to reconstruct the technical architecture of Facebook or Nasdaq, it is not easy to acquire their users.

Deep Integration: Enterprise software deeply embedded in workflows incurs high switching costs.

Ecosystem lock-in: A platform with a strong developer ecosystem and third-party integrations is more sticky.

Regulatory barriers: AI cannot help enterprises obtain the licenses and relationships required to operate in highly regulated industries such as finance, healthcare, or national defense.

Trust and Brand: Consumers and organizations still tend to trust well-known brands when making critical decisions.

Physical world constraints: Real-world limitations, such as physical infrastructure, robotics technology, and supply chain, still exist as realities that AI cannot overcome.

Deep User Insights: While AI can help realize some decent ideas, truly understanding user needs does not lie in the training data of AI, but comes from direct communication with users.

For early-stage startups that have not yet found PMF, finding PMF is a top priority. However, it may be more important than ever to think ahead about competitive advantage after PMF in the current environment.