{"id":297042,"date":"2024-03-01T06:18:46","date_gmt":"2024-03-01T14:18:46","guid":{"rendered":"https:\/\/www.saastr.com\/?p=297042"},"modified":"2024-02-29T20:30:20","modified_gmt":"2024-03-01T04:30:20","slug":"6-questions-founders-should-ask-themselves-to-drive-value-from-generative-ai-with-base10-partners","status":"publish","type":"post","link":"https:\/\/www.saastr.com\/6-questions-founders-should-ask-themselves-to-drive-value-from-generative-ai-with-base10-partners\/","title":{"rendered":"6 Questions Founders Should Ask Themselves to Drive Value from Generative AI with Base10 Partners"},"content":{"rendered":"<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Generative AI is a platform shift where models can take inputs such as text, image, audio, video, and code and generate new content into any of the modalities mentioned. TJ Nahigian, co-founder and Managing Partner of Base10 Partners, and Luci Fonseca, Partner, deep dive into the current GenAI landscape, incumbents vs. startups, and the six questions founders should ask themselves to drive value from GenAI.<br \/>\n<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For some context, Base10 is a research-driven investment firm focusing on companies automating the largest sectors of the real economy. They\u2019re trying to figure out what will happen with GenAI and share what they\u2019re observing today so startups and incumbents can take advantage of it to build significant value.<br \/>\n<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Base10 is interested in mega-trends that change how people live and work in the next ten years. We\u2019re at the beginning of a platform shift, and for the first time, GenAI has become accessible to more than just the mega businesses of the world.<\/span><\/p>\n<p><iframe title=\"YouTube video player\" data-src=\"https:\/\/www.youtube.com\/embed\/_EoaiPJ8yBI?si=du48os8yeQpqFFuG\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/p>\n<h2><span style=\"font-weight: 400;\">The Pace of AI is Increasing Dramatically\u00a0<\/span><\/h2>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297060 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3864.jpeg?resize=600%2C332&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"332\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/332;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297060 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3864.jpeg?resize=600%2C332&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"332\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Something ground-shifting has been happening over the last five years \u2014 the pace of innovation. The number of patents filed in 2021 in <a href=\"https:\/\/www.saastr.com\/category\/topics\/ai\/\" target=\"_blank\" rel=\"noopener\">Artificial Intelligence<\/a> was 30x the number published six years earlier. If we project out and keep the pace of innovation, think about what will happen in the next five years.<br \/>\n<img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297059 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3865.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/330;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297059 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3865.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" \/><\/noscript><br \/>\n<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">We\u2019re on the cusp of a golden age in AI, and the lesson learned from Cloud was that Cloud sped up the pace of development by a lot. At Base10, they expect to see the speed of development and deployment accelerate so dramatically that it will make our heads spin.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Another way to look at this is by how much venture funding goes into the sector. As founders, you know the last 18-24 months haven\u2019t been the most fun time to fundraise, but with one exception \u2014 AI businesses.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Last year, over $4B was raised in the first half. This year, it\u2019s already 5x more than last year, which was 5x more than the year before that.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Incumbents vs. Startups \u2014 A Framework to Understand Where You\u2019re Building<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It\u2019s helpful to have a framework to understand the universe and who\u2019s building where from incumbents to startups. By observing these segments, you can glean lessons if you\u2019re building in the same category.<br \/>\n<img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297058 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3866.jpeg?resize=600%2C334&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"334\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/334;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297058 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3866.jpeg?resize=600%2C334&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"334\" \/><\/noscript><br \/>\n<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Within these categories, you have platforms, infrastructure, and applications.<\/span><\/p>\n<ul style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Platforms are the model layer, the Googles, Metas, and incumbents. Startup platforms are OpenAI, Hugging Face, and Cohere.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Infrastructure is the layer where anyone allows you to use these largely generalizable models to create something with a more specific use case.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The last bucket is applications, both horizontal and vertical. For the incumbents, you have Notion and Gorgias, and the startups are Jasper, Copy, and Harvey.\u00a0<\/span><\/li>\n<\/ul>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Now, let\u2019s walk through startups at the platform layer.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">New Startups: Platform Layer<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297055 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3867.jpeg?resize=600%2C333&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"333\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/333;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297055 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3867.jpeg?resize=600%2C333&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"333\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The platform layer, or model layer, sees OpenAI as the clear giant in the room. Many others are also creating new LLMs and other models that folks use to get value out of GenAI. How are they doing this?\u00a0<\/span><span style=\"font-weight: 400;\">By building their own tooling but leveraging third-party tooling as well.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">New Startups: Infrastructure Layer<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297056 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3868.jpeg?resize=600%2C335&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"335\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/335;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297056 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3868.jpeg?resize=600%2C335&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"335\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The infrastructure layer is exciting and is tooling that enables you to tweak different models, integrate them, and scale them in cost-effective ways. LangChain is a popular framework to integrate and get value out of GenAI, for example.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">There is a whole host of companies innovating at the infrastructure layer to get more value, more control, and cut down costs as they scale GenAI for specific applications.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">New Startups: Applications Layer<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297057 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3869.jpeg?resize=600%2C331&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"331\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/331;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297057 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3869.jpeg?resize=600%2C331&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"331\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">There\u2019s a lot of fascinating innovation happening at the applications layer \u2014 changing mediums with text, writing, images, and audio. Businesses are changing the way you create music, recreating how films are made or dubbed, and disrupting the way programmers code.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">On the startup side, these businesses have scaled incredibly fast by taking large foundational models and wrapping them in a magical experience for the end user. In the application layer for startups, many face challenges that boil down to retention. It\u2019s been tough for a few reasons.\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For those of you selling to Enterprise, they have experimental budgets that run out.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For those selling to the prosumer base, they can be very churny.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">There are a lot of copycats, making it difficult to tell a differentiated story.\u00a0<\/span><\/li>\n<\/ol>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you\u2019re a startup building in this space, retention is a challenge, and you\u2019ll need to be more strategic.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Incumbents: Platform Layer<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297054 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3870.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/330;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297054 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3870.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At the platform layer, you can study these three large incumbents.\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Microsoft<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Google<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Meta<\/span><\/li>\n<\/ol>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Each is playing a different strategy. Google came out with the transformer model and then open-sourced it. That enabled LLMs built to leverage GenAI. Google was caught on its heels when it saw how fast OpenAI commercialized its offering. Since then, Google has rethought itself as an AI company, coming out with Bard.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Meta has leveraged incredible tech, primarily for their ad model and monetizing in a material way over the last 7-8 years, and also their feed and content model.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Microsoft is a master class in strategy for us. They\u2019ve opted to partner and outsource innovation, partnering with OpenAI early on with a billion dollars and, more recently, $10B. They have a lot of preferred access, rights, and control over OpenAI.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you look at the market caps of these businesses, they\u2019ve all done incredibly well this year. If you read earnings reports, two years ago, AI came up maybe once or twice in a call. Now, it\u2019s 100+ times.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Incumbent: Infrastructure Layer<\/span><\/h2>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297065 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3882.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/330;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297065 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3882.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">How do you enable folks to do this? A perfect example is NVIDIA. They are the popularizer of GPUs necessary to run LLMs, and they\u2019ve seen insane demand for GPUs. This last quarter announced revenue was up over 100% in the quarter, and now they\u2019re a top five company in the world by market cap.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">We\u2019re seeing this layer created and captured by incumbents.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Incumbents: Applications Layer<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297053 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3871.jpeg?resize=600%2C343&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"343\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/343;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297053 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3871.jpeg?resize=600%2C343&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"343\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Incumbents at the applications layer have, by no means, been sleeping at the wheel. NVIDIA is benefiting, not just because of applications at the startup level, but because every single company is developing an AI strategy, and no one wants to be caught without an answer as to what they\u2019re doing with GenAI.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">An even more dramatic shift we\u2019re seeing is that many of you are finding yourselves more productive these days. Engineers are more productive because Github\u2019s Copilot writes 50% of code. That\u2019s every other line of code.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you think about access and democratization of who can create, it\u2019s a really exciting time. ServiceNow has added GenAI into the product so you can do summarization and text-to-code.<br \/>\n<img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297052 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3872.jpeg?resize=600%2C332&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"332\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/332;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297052 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3872.jpeg?resize=600%2C332&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"332\" \/><\/noscript><br \/>\n<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">What you can see with these incumbent businesses is the ability to experiment quickly with GenAI. Many are doing this in-house, experimenting with open-source tools and building as they go, something worth noting if you\u2019re trying to sell to them.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Driving Defensibility and Finding Real Moats<\/span><\/h2>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297051 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3873.jpeg?resize=600%2C335&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"335\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/335;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297051 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3873.jpeg?resize=600%2C335&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"335\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">When Base10 Partners started, they were throwing darts at the wall to figure out what would drive defensibility and where the real moats would be found. Everyone said they\u2019d have access to proprietary data, get the best workflows, or hyper-customize in a way that would win.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Today, there are only three things that matter.\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Distribution<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Data<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Workflows<\/span><\/li>\n<\/ol>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Because only these things matter, Base10 believes that incumbents will capture a lot of the value in this early platform shift because they have huge advantages in distribution, data, and workflow over startup competitors.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Let\u2019s walk through some case studies.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">A Case Study: casetext<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297049 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3875.jpeg?resize=600%2C329&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"329\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/329;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297049 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3875.jpeg?resize=600%2C329&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"329\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Casetext is a legal software platform selling to Mid-Market and Enterprise law firms. If you\u2019ve tried to sell to a law firm, you know it can be challenging to get through legal review. Casetext has been doing that for 11 years and built a strong platform.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">But business stalled out at around $10M ARR. As a founder of that business, what do you do? Then GenAI comes out, and they\u2019re able to easily plug into GPT and launch their version of Copilot called Co-counsel, which does a lot of tasks lawyers need to do routinely.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It launched last year as an add-on and took off, going from 0 to $9M ARR in nine months. It\u2019s been acquired for about $650M in cash. They achieved this because they had distribution into these law firms, and the law firms wanted to use AI.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you\u2019re a startup, you\u2019d have a hard time getting through legal review.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">A Case Study: Notion<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297066 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3876-1.jpeg?resize=600%2C332&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"332\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/332;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297066 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3876-1.jpeg?resize=600%2C332&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"332\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Base10 spends a lot of time with this team, and they use it every day, leveraging the benefits of NotionAI in their own workflows. Notion launched the first of many upcoming AI features, and they\u2019ve priced it so that it may be at $100M ARR in the near term.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Some important lessons in how Notion executed this include:\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">They turned this feature on to a user base of 30M people, including a growing Enterprise practice. Think about the expansion opportunity there. The embedded distribution is a fundamentally huge advantage.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">When using NotionAI, you can utilize it in a workflow in tools that you use every day. It has access to your data and workflows. And while these models are incredibly generalizable, they are useful when you provide them with unique and private data. That\u2019s a huge advantage.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Understanding Notion\u2019s philosophy around GenAI, it\u2019s clear that this version of NotionAI is a single feature. But they think about GenAI as a core technology, like electricity. So, they\u2019ve gone back to the OG strategy they had 8-9 years ago, making tool-making ubiquitous. That\u2019s the core mission.\u00a0<\/span><\/li>\n<\/ol>\n<h3><span style=\"font-weight: 400;\">A Case Study: Gorgias<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297067 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3877-1.jpeg?resize=600%2C333&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"333\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/333;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297067 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3877-1.jpeg?resize=600%2C333&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"333\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Gorgias is a ticketing platform for customer support focused on e-commerce, primarily Shopify. This is a really constrained use case. The original thesis was to automate everything. It turned out that it was pretty hard to build out workflows and software support systems for individuals to be able to do that at the time.<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At the end of last year, they launched automations thanks to GenAI. Their customers don\u2019t know what AI is, but what they do care about is not having to respond to customers to give a better customer experience.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The automations are an add-on, priced at 50% of core offerings. They automated 7% of tickets, and today, are up to 18%. They hope to reach 50%. They have a significant amount of data they can train on this, and they already have distribution across 10k+ merchants.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">GenAI and the Business Model Perspective<\/span><\/h3>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297045 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3878.jpeg?resize=600%2C323&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"323\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/323;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297045 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3878.jpeg?resize=600%2C323&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"323\" \/><\/noscript><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">From a business model perspective, a few things are happening.\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">ARPU, ACV, and LTV are increasing. Some of that is by launching add-on products that can be priced as subscription fees or transactional per conversation.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Drop in costs. In the case of medical billing and QA testing for software, a human used to do this. Humans still do, but a lot less of them when you leverage GenAI. Those businesses aren\u2019t dropping prices, so you get a significant margin increase, increasing LTV.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Retention is increasing pretty dramatically across businesses with data, distribution, and the right use case.\u00a0<\/span><\/li>\n<\/ol>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Returning to the hypothesis. Thinking back through Cloud and mobile, what can you learn from them? Amazon wasn\u2019t built as a Cloud business or storage company. It was built as an incumbent e-commerce business. They just happened to launch AWS and ended up capturing way more value just in themselves than the entire on-prem storage market before them.<br \/>\n<img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297044 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3879.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/330;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297044 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3879.jpeg?resize=600%2C330&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"330\" \/><\/noscript><br \/>\n<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Meta wasn\u2019t a mobile company, but they captured more value from mobile than AT&amp;T and Verizon combined. The same could happen in GenAI. It doesn\u2019t mean there won\u2019t be startups that win. Incumbents will capture a lot, and we\u2019re starting to see that with Meta and Google, who have traded up dramatically.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">This doesn\u2019t mean startups should stand down. It just means that to beat incumbents, you have to be more strategic.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">6 Questions Founders Should Ask Themselves<\/span><\/h2>\n<h2><span style=\"font-weight: 400;\"><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297048 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3880.jpeg?resize=600%2C334&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"334\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/334;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297048 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3880.jpeg?resize=600%2C334&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"334\" \/><\/noscript>\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For founders who want to build a new GenAI company, ask yourself these three questions.\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">What niche, market, or vertical can you absolutely dominate? Not a slight solution, but it truly dominates in a way that\u2019s not adjacent to particular incumbents.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Retention is absolutely key. GenAI has fundamentally shifted the way consumers and users actually expect to interact with your product. What can you really change in your product to drive product market fit in a way that tackles all the retention issues these startups are facing?\u00a0<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">How do you make GenAI core and foundational to your product and not just a feature? Some of the most interesting GenAI companies don\u2019t even talk about GenAI, but it\u2019s powering everything in the background. You\u2019re building a business for the long term.<\/span><br \/>\n<img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297043 aligncenter lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3881.jpeg?resize=600%2C331&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"331\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 600px; --smush-placeholder-aspect-ratio: 600\/331;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"size-medium wp-image-297043 aligncenter\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3881.jpeg?resize=600%2C331&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"600\" height=\"331\" \/><\/noscript><\/p>\n<hr \/>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For incumbent founders wanting to drive value and new GenAI revenue streams. Ask yourself these three questions.\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Let\u2019s go back to the original mission and core problem you\u2019re solving for the customer. What are the 1, 2, or 3 problems you can now solve that you couldn\u2019t before because the tech didn\u2019t exist? How do you tackle those and throw resources at them?\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Take out your P&amp;L or metrics dashboard and go through every metric. Ask how Generative AI can actually help you optimize your cogs, LTV, conversions, or whatever.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The pace of innovation is dramatically fast. How do you actually experiment and test in a way that meets the pace required for this platform shift? There may be cultural and organizational changes you might need to make to do that.\u00a0<\/span><\/li>\n<\/ol>\n<p><iframe title=\"YouTube video player\" data-src=\"https:\/\/www.youtube.com\/embed\/_EoaiPJ8yBI?si=du48os8yeQpqFFuG\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Generative AI is a platform shift where models can take inputs such as text, image, audio, video, and code and generate new content into any of the modalities mentioned. TJ Nahigian, co-founder and Managing Partner of Base10 Partners, and Luci Fonseca, Partner, deep dive into the current GenAI landscape, incumbents vs. startups, and the six&#8230; <br \/><a class=\"more-link fade\" href=\"https:\/\/www.saastr.com\/6-questions-founders-should-ask-themselves-to-drive-value-from-generative-ai-with-base10-partners\/\">Continue Reading<\/a><\/p>\n","protected":false},"author":13,"featured_media":297526,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_selected_social_profile":[]},"categories":[24898,31,29,122,20],"tags":[],"class_list":["post-297042","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ai","category-blog-posts","category-early","category-featured-videos","category-videos"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/03\/youtube-thumbnails-AI.png?fit=1000%2C563&quality=70&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p5oib2-1fh0","jetpack_sharing_enabled":true,"fifu_image_url":"https:\/\/www.saastr.com\/wp-content\/uploads\/2024\/02\/IMG_3864-600x332.jpeg","_links":{"self":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/297042","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/comments?post=297042"}],"version-history":[{"count":0,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/297042\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media\/297526"}],"wp:attachment":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media?parent=297042"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/categories?post=297042"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/tags?post=297042"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}