AI is changing everything: venture-building included

By Chris T. , Chief Strategy Officer at Mach49

AI has become a very black or white discussion, spanning from “It will destroy our economy” to “AI will save humankind”. I’m going to go against the grain here, because my belief is that AI doesn't only represent chaos and destruction, it also creates opportunities of all sorts. Both are true. It’s an unsexy message, but it’s an honest one.?

On the one hand, AI is not going to be wine and roses. It's going to be disruptive in a manner we've not seen in a long while: much like it felt when the railroad reached your town, or when Henry Ford instituted mass production on the factory floor. The scenario that AI can tackle more than 40% of tasks in some jobs, is probably true.?

For the largest companies in the world, AI has become synonymous with increased efficiency. “Efficiency” in this case, of course, is a euphemism for “have less people”. Pursuing this kind of operating efficiency will yield near-term positive impact on any company's EBITDA and thus will drive short and medium term stock price performance.

But that will be temporary. And it misses where the big, long term, opportunities lie.?

That brings me to the other end of the AI fear/opportunity spectrum, which is in creating new and sustainable growth via building ventures with AI assistance. Because as much as efficiency drives near-term stock increases — long term sustainable growth is what investors both crave and need.?

As a seasoned entrepreneur and tech industry veteran, I've seen how cutting-edge startups function today compared to two decades ago. Back then, the typical path was a few friends in a garage working tirelessly to create a basic functional product. They'd then pitch to investors with little more than a dream and a hope. Once they got funding, the motto was "build it and they will come," followed by a mad scramble to find product-market fit before the cash dried up.

The introduction of lean startup methods refined this model by emphasizing early customer development and iterative releases to test assumptions. But, the timelines were still long, generally required a lot of capital (albeit less than before), and the chances of success were still low. Out of every 10 initial investments, between 7 and 8 fail to raise a Series A. Of those that do, 70% will never make it to an exit.

The rapid pace of tech change has squeezed these timelines even further. Startups have to move faster than ever to stay in the game.?

Today, AI offers founders tools to significantly speed up the process of building a business. They can take advantage of AI’s ability to iterate new ideas, test those ideas, and conduct experiments with those ideas — all at speeds of 10x or more, faster than humans.?

I know this, because I tried it.?

I combined a set of AI tools and programs, and chained them together with some custom code to create a sort of "AI Engine" designed to run a very specific set of experiments in order to test hypotheses. Once up and running, I asked the AI engine to look at multiple new company ideas. I worked on the prompts at length, but then set it running — I let the programs run for a month, racing across markets, product ideas, levels of funding and staffing. I also asked the engine to generate and compare solutions for incorporation, website development, demand generation and sales funnel, among other variables.?

The engine ran without much intervention. I gave it my credit card: the first week I spent twelve hours on the system. The week after, I only needed 60 minutes. After that it all operated with only one hour per week of my time.??

At the end of the month, my experiment with growth-oriented AI produced twelve potential start-up ideas. Along the way, I had entertained myself watching the race as one after another prospective start-up pulled ahead or fell behind the others. In the end, there were four finalists.?As a veteran entrepreneur who has created several successful companies, I was certain that all would likely have received venture funding. After I picked the winner, an acquaintance of mine took one look at it — and bought the company idea.

Total cost to me of the entire experiment? $20,000.?

In my experience, such a process, had it been repeated without AI and as a new venture program inside of a Global 2000 company, would have taken six to eighteen months and cost several million dollars — if it even survived rejection by the organizational immune system.?

The implications of this are profound: to entrepreneurs, to the venture capital industry, and to our economic future. Based on my test of the hypothesis, it seems clear that a future startup team could be one or two people working with a set of frameworks, tools, and custom “integration and control” code which ties together various AI services. It seems clear that, in the future, startups are likely to be much smaller teams — but teams of humans augmented by AI based tools and systems.

This has profound implications on the entire startup ecosystem — but also on corporate venture building.

Chief Strategy Officer CHRIS TACY is a respected expert in business model disruption and corporate venture transformation, who has spent over 25 years sharpening his skills at the crossroads of business, innovation, strategy, and entrepreneurship. He leads our Venture Strategy practice and lives in Hawaii with his partner of 31 years, Valerie, who is also part of the Mach49 team.

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