From SaaS to IQaaS: The New Landscape of AI-Driven Entrepreneurship

In 2014 I wrote an essay for The Wall Street Journal’s 125th anniversary edition titled “The Future of Entrepreneurship” where I analyzed different technologies and how they might potentially impact our lives as well as entrepreneurship. Nearly 10 years later and in the throws of AI my outlook has expanded. Though I was off on a couple of predictions, 3D printing and drones everywhere, one thing that I was spot on about is that everyone will be an entrepreneur. This could be “lovingly” known as the creator economy but I think it’s more all encompassing than those who monetize social media.

Currently, the entrepreneurial landscape is on the cusp of a deep transformation, namely fueled by the accelerating advancements in artificial intelligence (AI), a tightening economy, and VC’s pulling back on how much they are investing. In fact in early 2023, the aggregate deal value in the venture capital market fell almost 65% from US$188.2 billion in the fourth quarter of 2021 to US$67.4 billion in the first quarter of 2023​​. While the market appears to be bouncing back with shiny new AI investments, the past 24 months for VC-funded startups has been challenging. It’s given Founders, myself included, time to rethink how they want to build (or rebuild) their business and question the status quo. That, coupled with the speed of AI advancements, is creating a shift in the fabric of high-growth entrepreneurship. This shift is not just about the adoption of new technologies but a fundamental change in the ethos of entrepreneurship itself. 

In the next three to five years, we are likely to witness a dramatic shift away from traditional venture capital (VC) models, ushering in a new era where founders retain more equity and, consequently, more control and freedom in their ventures. This shift is a fundamental redefinition of what it means to be successful in business. Situations like what occurred just this past Friday with the ousting of OpenAI’s co-founder Sam Altman is a signal we should pay attention to. Though no VC’s were on his board (a rarity but a signal in and of itself) it’s still a very real truth that outside capital and board control doesn’t equal what most entrepreneurs are looking for: Freedom.

In this new era of entrepreneurship Founders are increasingly tailoring their approach to align with their personal values and vision, leading to a more personalized entrepreneurial journey with AI helping to bring this to fruition. 

Coatue, a hedge fund with a VC arm with $47B assets under management (AUM), privately released a 115-page report recently titled “The AI Revolution.” The report is loaded with data on where AI is going and includes some insight on entreprenuership as well. You can download the full report at the end of this essay but I’ve pulled out some of the more intriguing insights based on our discussion today. Let’s explore…

SaaS > IQaaS

Remember when every company launched was a SaaS (Software-as-a-service) company? Well, with this new surge in generative AI we are at the beginning stages of a new era called Intelligence-as-a-service where, like I discussed last week, everyone will have the ability to monetize their unique point of view. It’s less about skillset since that will become automated. It’s more about your unique knowledge based on practice, mastery, or expertise.

This new era is less about building and “coding” and more about thinking and creating using natural language programming, the act of prompting or training and AI based on your unique insight/data.

The S-Curve of AI

With each technical advancement there is usually an S-Curve of growth and adoption. Along this S-Curve history shows us that market leaders emerge. With the adoption of the Internet we saw companies like Netflix, Facebook, and Google emerge. In the smartphone era we saw behemoths emerge like Uber, TikTok, and Snapchat. We will see the same trend in the AI era with gains likely to be significantly more than th 12x the smartphone era saw likely because the speed of adoption is typically cut in half with each platform shift.

Small is the New Big.

One of my favorite insights, and one that I feel personally and also see in the companies I’m working with at Fruit Ventures, is the move towards smaller teams. People management can be one of the most satisfying endeavors as a leader but it can also be one of the most frustrating and take you away from the creation process. This new era empowers entreprenuers to have less overhead and work with a small group of leaders who in turn leverage AI to execute the work that typically a department with 5 or more individuals would do.

And because of this…

Less Funding is Needed

This next wave of companies (AI Natives) are fast, nimble, creative, have less technical debt and overhead, and simply don’t need the amount of capital (if any) to succeed. The Incumbent Kings; think Facebook, Google, etc; are slow moving and operating on an old OS (pun intended). There is an opportunity to create new incumbents (think OpenAI) or create a layer downstream and play within and across ecosystems. It’s your choice.

Final thoughts…

It’s a critical moment for many Founders. It’s a moment where you get to decide not just the company that you want to build but also the life that you want to live. The idea of a “successful” company is transforming and it no longer means millions in funding, large teams or IPO’s. A “successful” company doesn’t have to mean a loss of health, time, and energy because of the industry status quo.

Everything is changing.

Everything has already changed.

It’s your moment to choose the red pill or the blue pill.

If you’ve gotten this far thank you. You can download the Coatue’s full 115-page report here. If you’re on the same wavelength I think you might be interested in joining my newly launched membership community AI Future Lab. It’s for those of us who are excited about AI and see it an opportunity to build on our own terms.

Until the next piece of the puzzle falls into place,

AB