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A Brief Note To Our Founders Re: Impact Of Artificial Intelligence

Below is a short note we sent to our portfolio founders yesterday. It’s no secret that “AI” is all the rage in startup technology today, but we felt that most of the discussion on this topic centered around new startups. What about existing startups? Those existing startups can either harness and/or be disrupted by this new wave, so we wanted to explore that in some more depth for our portfolio founders. I’d like to thank my colleague Aashay who should be credited with framing this in greater detail.

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Given the current hype-cycle around all forms of AI (large language models, generative media, etc.) right now, we are sharing some perspective with Haystack founders on the current AI landscape and its potential impact on both existing and de novo startups. We believe the current version of AI (primarily due to the advent of large language models) represents a platform shift similar to that of PC, cloud, or mobile before.

With every major technology platform shift, there are legacy companies disrupted, new opportunities for startups & scale-ups, as well as businesses who get caught flat-footed across the enterprise and consumer stack. In recent years, there have been other promises of platform shifts – notably crypto and even AI previously. Mitchell Hashimoto, co-founder of Hashicorp, does a nice job laying out why this time could be different.

Our job as your early-stage investor is to relay information from the broader ecosystem to you, but we want to be clear –  it’s up to you to decide as leaders of your businesses what to do with that information. We are here to chat live anytime about these ideas, so please do not hesitate to reach out to us.

Impact of AI on startups and growth stage companies

These are a few examples of ways AI could impact your current business.

  • Competition entering your category: Expect to see new startups getting funded in your category that have an AI-native twist, bent, or functionality to them. Some will even have early access to different model architectures (see Harvey.ai in legal). Future potential investors evaluating your company, as well as customers looking at vendor options, will pay attention to these shifts.

  • Financing market: As noted, every major VC firm (in every nook & cranny) is focused on this. This can have an impact on your downstream capital raises. See from Sequoia, A16Z, Greylock, among many others. Our belief is that in future VC discussions, they will evaluate founders and existing teams partly-based on their ability to understand how AI can impact their business.

  • Incumbents getting smart: Unlike previous platform shifts, large companies are not ignoring this space. Large companies like Salesforce, Databricks, and Stripe are actively thinking about how to incorporate AI across their product suites and even places where they may have been previously short-sighted.

  • Some companies are completely rearchitecting their products: We know of some mid to growth stage companies who are completely re-architecting and positioning around generative AI or foundation models. Some applications know their offering for end users can be supercharged with AI, and some infrastructure companies know they can be better suited by serving AI use cases. On the very early side, we also see some pre-seed stage founders who were before in the wilderness looking for product-market fit with their original idea now using this wave and their freedom as an opportunity to build something entirely new with AI.

Case studies

These are a few examples of companies that have incorporated AI natively into their existing products at production scale.

  • Notion is the all-in-one workspace for your notes, tasks, wikis, and databases. They recently launched Notion AI which helps users automate tedious tasks and summarize text.

  • Ironclad* is a contract lifecycle management platform used by companies to handle every type of contract workflow. Their AI (in partnership with OpenAI) helps legal teams get through redline faster.

  • Rewatch* offers a private and secure video channel for teams. They can build AI-generated summaries for any video meeting inside of an organization.

There are other companies we know of where this is the active priority for their leadership. A few examples include Palo Alto Networks (one of the largest publicly traded cybersecurity companies). See this tweet from CEO Nikesh Arora. Another example is Navan (fka TripActions) – incorporating AI into their product suite is what the CTO is obsessing over at the moment.

*Denotes Haystack portfolio company.

How does one quickly get smart on the space?