Engineering teams within AI application startups are much smaller than a classic software company - maybe half the size or less.
Let’s run an experiment : let’s assume every public software company benefits immediately to the same extent & cuts R&D spending by half.1
How would the value of these businesses change?2
72% of unprofitable SaaS companies would become profitable.
Public SaaS companies’ growth rates have halved since 2023, as David Spitz pointed, from 36% to 17%.
Why? There are few, fast growing, younger SaaS companies to sustain the growth rates.
The top quartile companies are growing at slower rates today than the bottom quartile companies in 2016. The median has never been lower in the last ten years.
Monday’s analysis cost about 27 cents to produce.
This little screenshot is of Claude Code, the product I use now to write the analysis of datasets like estimating the value of a venture firm.
I didn’t expect to find this feature initially as useful as I do now.
But it makes me feel great because of how inexpensive it is to be productive. 27 cents for a statistical analysis of a small dataset is a bargain considering the battery of statistical tests the AI applied.
How do you position and scale an AI company in a rapidly evolving market?
Join us for an in-person Office Hours session in San Francisco with Alan Hsia, VP of Marketing at Fireworks AI.
Alan brings deep expertise in go-to-market strategy and will share insights on:
📅 March 25, 2025, 5:30pm
📍 San Francisco
🔗 Register here
A small spin-out from a publicly traded behemoth launched with the ambitious vision of transforming their entire industry. Within just a few years, as capital markets shifted in their favor, they emerged simultaneously as both innovators & titans in their field.
We don’t often think of private equity this way, but that’s exactly what happened when KKR spun out of Bear Stearns and Michael Milken at Drexel Burnham Lambert catalyzed the junk bond boom of the 1980s.
Imagine if every time you edited a document, the word processor forced you to retype everything that had been written before that edit.
How expensive would that be for a company?
This is exactly how data transformation works today. Each time a data engineer modifies some part of the data stack, the Cloud Data Warehouse & its transformation layer recalculates everything.
What if the system were designed so that it only recalculated the metrics needed? How much less expensive would it be?
As startups scale, effective management becomes the difference between chaotic growth and sustainable success. After analyzing hundreds of posts on startup management, I’ve distilled the key pieces of advice that founders and leaders should keep in mind.
Management, like engineering, has repeatable design patterns that can be learned and applied
Which is the best business in AI at the moment?
I analyzed Q4 revenue data from publicly traded companies across multiple sectors—software companies, consulting firms, and hardware manufacturers to determine which segment dominates the AI market.
NVIDIA’s data center business dominated the field, generating $31b in Q4 revenue with impressive margins exceeding 70%.
In second place, Microsoft’s AI business, including Azure, is at a $3.25b Q4 revenue.
During a recent Theory Office Hours with Kady Srinivasan CMO at Lightspeed Commerce, Dropbox, and Klaviyo, we discussed several powerful insights emerged on how early-stage companies should approach marketing.
Here are the highlights :
Define Your ICP Before Anything Else
The most fundamental decision for any startup is determining your Ideal Customer Profile (ICP). Without clarity on exactly who you’re targeting, GTM efforts become diluted and ineffective.
The earlier the company, the narrower it should be. With scale & capital, it can broaden.
“I think it’s super important to know which layer of this you are tackling”. What we were selling was not just email marketing. We were actually selling email as a growth lever, meaning we could go in and say, ‘we’re going to help you drive 40% of your revenue from email,’ which was completely not done in the industry before. We could only get to that level of insight because we knew our ICP really well. We changed the game ie we changed the problem people bought us for."
When launching a startup, narrowly defining your ideal customer profile (ICP) is not just helpful—it’s essential for survival. Focus is “the most important thing” for startups, with “trying to straddle too many things” being “the biggest killer of startup success.”
A precise ICP forces you to concentrate your limited resources on a specific audience where you can perfect your sales motion, messaging & value proposition.
Counter-Position Against Industry Norms
Early-stage startups should challenge the status-quo. This isn’t about attacking competitors directly, but rather challenging how customers think about solving their problems.
“Counter-positioning is essential for startups because there’s a way that the world has moved, and you are saying, ’no, I think it will move differently,’” “You have to surprise the buyer. You have to tell them, ‘you’re thinking about the world incorrectly.’”
Klaviyo did this by positioning itself not as an email tool but as a revenue driver. We told customers, “Google is killing all your third-party cookies. You will only have first-party data to rely on, so if this is your time to switch, you have to do it now.” This created urgency around the problem and showed customers what was at stake.
Align your GTM strategy & Product to your ICP & TAM
Your GTM strategy should always result from considering your ICP’s buying behavior, needs, & the TAM, not the other way around.
PLG motions with 2-4% conversion rates require millions of potential users to achieve $100m+ ARR business. In markets with smaller customer counts, each lead is so valuable it should be managed by a salesperson, which increases conversion rates to 15-30%.
If you are a PLG business, you can migrate upwards over time. If you are an SLG business, becoming a PLG business is quite challenging to impossible. At Dropbox, we were primarily a PLG business that became more SLG over time as customers pulled us market.
Build Credibility Through Brand Value, Not Fear
While fear can drive short-term action, it creates negative brand associations. The most successful companies build marketing around positive outcomes and aspirational values.
“Creating fear never works, because in the immediate, you can probably prompt people to take action because they’re like, ‘Oh my! I must do something,’ but it leaves a negative perception in their mind.” “You don’t become a beloved brand over a period of time.”
Instead, focus on how your solution helps customers achieve positive outcomes. Klaviyo positioned itself as a premium brand that took its craft as seriously as its customers did.
“We don’t want to be like every other B2B email company with blue fonts. We want to be completely different.”
Most startups play defense when discussing pricing with customers. They dance between asking for too little, leaving money on the table, and asking for too much, only to lose the customer’s interest. The very best companies lead their customers in that dance. They use pricing as an offensive tool to reinforce their product’s value and underscore the company’s core marketing message.