AI levels the playing field for new SaaS companies.

New AI based SaaS platforms will not disrupt market incumbents but AI does take away the incumbents' competitive advantages. A competitive window has opened.

Some early thoughts on the emerging AI SaaS market from a beginner AI SaaS platform founder:

As a beginner founder of a AI SaaS platform,?I have been drinking from the firehose when it comes to product led growth, product market fit, etc. During this journey, I have a couple of broad evolving insights that are worth sharing.

How to think about the current generation of AI/LLMs:

The more you think about the current generation of AI as an amazing pattern finding machine and less like ‘AI’, the better you will be at understanding its utility. The magic trick of LLMs is the ‘human’ level of ability they demonstrate in matching complex patterns.?

LLMs will get smaller, faster and are destined to run on device. In just one year, output from newer smaller models is keeping pace with last years larger models. This reduces the prohibitively expensive hardware requirements to get started.?

LLMs and security:

Providing LLM security/guardrails is a red herring. LLMs are not the source of truth.?AI/LLMs currently have a garbage in/garbage out problem. You cannot bake that security into the LLM to account for all garbage in. We are many years away from AI that understands Fact v Fiction. Humans do not do well with Fact v Fiction and the AI will only be as good as we can teach it. Google’s “issues” with Gemini AI are not issues. From my perspective, the machine is operating as planned.?

AI/ML levels the playing field:

You can do more with less. The leveling of the playing field, allows you to provide all the value of incumbent products built on traditional technologies at a fraction of the cost. Open source is moving just as fast as OpenAI/Google etc. ?Since open source LLMs have been trained on large amounts of data, FAANG’s access to large amounts of data is no longer a competitive advantage. The LLM your SaaS product has access to are as good as the LLMs that FAANG has access to.

A lot of AI/LLM companies coming out of stealth have big war chests and, from the outside, all of the advantages. The speed of AI/LLM is moving so fast that those years of stealth and funding do not amount to much. The new LLMs of the last year are so much better, that these stealth companies are starting over. Your SaaS offering can come in at the same quality level of the better funded competition.

With these advantages, you will not disrupt FAANG with your SaaS LLM feature that masquerades as a product. FAANG is not asleep at the wheel and is quickly adding LLMs to their product offerings.?You still need to have product market fit. If you can find that then the LLM empowers you to compete.?

One tip for the technical founder:

Your technology isn’t the product. Whatever you have achieved with AI is a tech demo. Solve a problem with it. Demo the solution to the problem. That’s the product.?