AI as a horizontal and leapfrogging enabler for the rest of the world, and more
AI as a horizontal and leapfrogging enabler for the rest of the world, and more
The future of innovation is global. We discuss it here
AI as a horizontal
I keep getting pitched artificial intelligence startups. But what does it actually mean to be an AI company?
I think fintech is a good analogy. 15 years ago fintech was a stand alone sector. There was ecommerce, biotech, education, health... and fintech. This was the topic of my conversation with Fortune’s Venture Daily last week.
In my view, fintech is becoming a horizontal enabler. Embedded financial services means every company is/can be a fintech - think lending via buy-now-pay-later, payments, insurance, banking etc.
Perhaps not dissimilar to the evolution of startups. As Peter Wagner explains in our discussion, once upon a time, there was a thing called "internet companies" but today no startup refers to itself as a internet company. We have so much more nuance.
The ramifications will be global, and they are coming fast.
But it also comes at a risk. In an era of move-fast-and-break things, there are certain things that cannot be broken, such as medical recommendations or financial services records. Legal issues still need to be worked out (think copyright). We will need self regulation and in some cases government regulation.
AI Leapfrogging
If AI is becoming a horizontal enabler then what are the 2nd order effects? To me, one of them is leapfrogging.
Let’s extend the fintech analogy: in the US, the big news in fintech is FedNow, realtime nearly free payments. Of course, this is old news in many places around the world, where everything from mobile money to QR codes have been offering variations of this for years. They leapfrogged Visa and Mastercard to have cheaper & safer networks. Without legacy technology that needs to be upgraded, in new markets or new industries, a whole new way of thinking could be applied.
In that vein, great piece that argues we’ll see leapfrogging take place in certain industries (and regions) due to A.I. “Where will this happen? The majority of the productivity gains from the past decade of digitization were realized by a few major verticals (tech, media, and finance). But there are still many verticals where protocols and software haven’t changed much in 20+ years, and the SaaS revolution didn’t leave a mark. There are still industries that, quite literally, still use pen and paper.”
As an aside, one industry I believe will see a big shake-up is venture capital. The practice of venture capital has not fundamentally changed since it was applied in the whaling industry. AI will come (and is already here). “Let’s be honest: Much of what a typical venture capitalist does—reading, summarizing, and ranking—is what large language models already do extremely well. Growth-stage VCs will be affected first. That’s where decisions are already made based on data, so it makes sense for A.I. to take over. Seed will be affected last: There’s less data available. Intangible human elements matter most.”
Interesting discussions
What does it take to raise a successful Series A? There aren’t perfect metrics. But a few we can all agree on: “A clear path to building a large company with a $1B+ terminal value, as judged by the investors from their point of view; Be in the top 5-10% of opportunities in that VC’s pipeline of companies; Strong founding team that investors believe can take the company to the next level.”
Embedded fintech meant everyone would become a fintech. But that required someone to power the financial services portion. For Apple, their partner is looking for the exit.
Enjoyed this piece on the tradeoff between venture scale and venture risk. Venture scale (targeting building billion-dollar businesses) adds new risks to the business too. This includes pressure to continue scale (even with poor unit economics), moving targets, loss of control, lower optionality and pressure to exit. These aren’t bad in of themselves but need to be understood by founders considering raising capital.
A startup studio created 130 companies then shut down. It wasn’t because the businesses were bad. The problem was with the cap tables. “The unfriendliness has to do with Fractal's terms and conditions for investment, 20 founders tell Insider. The founders wished to remain anonymous for fear of retaliation and because they said they'd signed nondisclosure agreements. Like other venture studios, Fractal takes a supersized share of ownership in each startup and leaves a smaller stake for the founders. That's a red flag for new investors coming in, who want to see a founder has a financial incentive to hustle and stay in the game — and the potential to make billions of dollars through selling the startup or taking it public.”
FWIW, I don’t believe the studio model is bad. To the contrary, I think it can be a massive accelerant - assuming win-win cap tables and value-add. For example, loved this behind the scenes look at how one incubator offered lead-gen to their portfolio. “
I love this. A Japanese bookstore that sells only one book at a time. In the age where everything is available anytime, curation matters, choice matters, advice matters. This takes it to the extreme of course. “This bookstore that sells only one book could also be described as ‘a bookstore that organises an exhibition derived from a single book’. For instance, when selling a book on flowers, in the store could be exhibited a flower that actually appears in the book. Also, I ask the authors and editors to be at the bookstore for as much time as possible. This is an attempt to make the two-dimensional book into three-dimensional ambience and experience. I believe that the customers, or readers, should feel as though they are entering ‘inside a book’.”
The Canadian wildfires are giving us a preview of the economic tolls of climate change to come. “Canada’s wildfires have burned 20 million acres, blanketed Canadian and U.S. cities with smoke and raised health concerns on both sides of the border, with no end in sight. The toll on the Canadian economy is only beginning to sink in. The fires have upended oil and gas operations, reduced available timber harvests, dampened the tourism industry and imposed uncounted costs on the national health system. Those losses are emblematic of the pressure being felt more widely as countries around the world experience disaster after disaster caused by extreme weather, and they will only increase as the climate warms.”
Book of the month
When someone says salesman, I think slicked back hair, pushy behavior, selling a lemon. But this month I read Daniel Pinks book: To Sell Is Human: The Surprising Truth About Moving Others and it convinced me that everyone is in sales.
As the Guardian reviews it: “this is less a book about the conniving tricks of this slippery trade, and more of a human guide to how sales might work and be successful in the 21st century. Pink's mantra is that selling is not limited to call centres, shops or garage forecourts. It's something we all do every day – when we try and cajole our children to go to bed, we are ‘moving’ them to get what we want, in exactly the same way as we might persuade someone to purchase some artisan bread… It first explains how sales have irrevocably changed thanks to the internet: buyers are now armed with information and are no longer at the mercy of the pushy man in a shiny suit.” And because of this how we do everything must change as well.
