For coding, this has started to happen and it's in full swing, what about other domains?
There needs to be a moat. I see all these startups with a moat that is no bigger obstacle than a puddle.
A local (geographically to myself) pre-LLM (Convolutional Neural Network) company invested in a huge moat, building a large training set of human labeled data ... I knew the moment I saw an LLM that could ingest image that their moat had evaporated in an instant. A lot of the technical staff either left or lost their jobs but the company appears to be limping on hoping for an exit.
If a startup depends on a secret prompt and a few MCP servers, they have no moat.
I think the next wave of AI-based SaaS (rather than pure AI API providers) will be companies like the Legal IDE (Tritium [1]), recently featured on the homepage. Tools that innovate and use AI, but would still be innovate even without it.
[1] I have no affiliation whatsoever. I just liked the demo and the concept.
Cursor doesn’t have a moat. And yet…
they have SOTA completion models (bought NineTab, founder left already, but still).
Cursor moat is they're the touch point with customers, not the big labs. imo
they can use all that data to better improve the ux/ui and piggyback on general models improvements
The “step one: get user data, step two: ???, step 3: profit” business model is well established, and it definitely doesn’t always work.
Only reason I bring it up is related to your moat comment. supply chain stuff is tied into workflow that becomes institutionalized, and typically more b2b, dev tools are more like b2c, so you really have to compete on merits hard, moats of b2c2b look to Slack or anything with seats/licenses/team features.
In the new AI world we can see it starting to emerge, on one hand you have something like Cursor, on the other something like charlielabs.ai - Will be interesting to see how it all plays out, but I wanted to just add some nuance I've been thinking about recently. :)
(full disclosure I'm considering joining charlie labs, don't want to be accused of shilling later if I do.)
Why does there need to be a moat? You don't believe in markets and competition?
Even the massive successes were still essentially novel takes on existing ideas, when they were in YC: Airbnb as Couchsurfing variant; Dropbox as file sharing service with a better UI; Stripe as PayPal but not terrible. Etc.
I wouldn’t really expect the average company at this stage to be groundbreaking.
You are being overly negative here. No one said they are doing something groundbreaking. If they were doing something groundbreaking with credibility, they wouldn't be giving away 7% to YC at $2M valuation. All the big AI folks who are "aiming" to do something groundbreaking are raising at 500 times that.
Like brands, customer count, contracts, hardware access, headcount, and existing progress.
Thinking openai is worth more than a day1 startup only because they are more ambitious requires all their years of funding, progress, bd, sales, and brand have little value. In my opinion these things matter a lot more than long term ambitions (which always change in response to the market anyway).
The trickle-down wealth transfer goes like this: Federal Reserve -> Banks -> Traditional Businesses (who do the hard work of actually providing goods and services people need) -> B2B SaaS that sells them software to replace spreadsheets.
True inventors and innovators tend to be eccentric and purpose-driven rather than money-driven. That is actually a negative signal for YC. They want the slick grifters, popular kids, who can wine and dine clueless execs at "enterprises" to sell them chat apps like Slack at $100/seat. Much easier and faster way to get investor ROI than pie-in-the-sky "innovation".
You can even find that in PG's “essays”, although he doesn't say it that directly.
After getting backed and receiving adequate funding, all that matters is maintaining a good growth rate to remain a purpose-driven business.
I wonder if all this focus on AI companies is actually denying opportunity to founders who have better ideas? Every AI agent company in YC and other accelerators is one that could have been taken by someone else.
But that’s the thing, AI is the highest risk highest reward opportunity, which fits the VC model. A boring CRUD app that solves an actual problem might be more likely to succeed but less likely to explode into a unicorn.
This is hilarious and soul killing at the same time. The AIs are going to argue with each other over whether or not a human gets health care.
AI is a force multiplier.
Forces can be applied in a negative direction too, and often are
Maybe the rich and powerful don't know much history. Or maybe they have convinced themselves that this time they will get away with it, because of... Something. Automation? Globalization?
I am not sure. I find myself very frightened of the idea of a massive and violent revolution
No one there is interested or capable of solving actual problems. They just want to be another middleman leeching value.
aspenmayer•7mo ago
The 10 most exciting AI agent startups at Y Combinator's Demo Day for its first-ever spring cohort
https://archive.is/OgCkl