{"id":311232,"date":"2025-04-08T07:10:11","date_gmt":"2025-04-08T14:10:11","guid":{"rendered":"https:\/\/www.saastr.com\/?p=311232"},"modified":"2025-05-10T12:29:51","modified_gmt":"2025-05-10T19:29:51","slug":"the-problem-with-small-but-mighty-ai-start-ups","status":"publish","type":"post","link":"https:\/\/www.saastr.com\/the-problem-with-small-but-mighty-ai-start-ups\/","title":{"rendered":"The Problems with &#8220;Small But Mighty&#8221; AI Start-Ups"},"content":{"rendered":"<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter size-full wp-image-311365 lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-scaled.jpeg?resize=1000%2C506&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"1000\" height=\"506\" data-srcset=\"https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-scaled.jpeg 1000w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-980x496.jpeg 980w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-480x243.jpeg 480w\" data-sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1000px, 100vw\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 1000px; --smush-placeholder-aspect-ratio: 1000\/506;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter size-full wp-image-311365\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-scaled.jpeg?resize=1000%2C506&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"1000\" height=\"506\" srcset=\"https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-scaled.jpeg 1000w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-980x496.jpeg 980w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/IMG_7042-480x243.jpeg 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1000px, 100vw\" \/><\/noscript><\/p>\n<p>So it&#8217;s become a thing with many founders and VCs to think how far you can go in AI today.\u00a0 Many of the early break out leaders in AI for B2B and otherwise have been &#8220;small but mighty teams&#8221;. \u00a0And it\u2019s not a completely new vibe. \u00a0Instagram had just 13 employees when Facebook acquired it for $1 Billion. \u00a0But it did have just one product, strong network effects, and no sales team.<\/p>\n<div class=\"embed-twitter\">\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">I put together a list of 33 startups who raised $10-50M in recent weeks from top-tier funds and have &lt;50 employees. They&#39;re all hiring: <a href=\"https:\/\/t.co\/TtAGgC9NHr\">pic.twitter.com\/TtAGgC9NHr<\/a><\/p>\n<p>&mdash; Ben Lang (@benln) <a href=\"https:\/\/twitter.com\/benln\/status\/1907143598782513470?ref_src=twsrc%5Etfw\">April 1, 2025<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/div>\n<p>Honestly we&#8217;d all love it the Small But Mighty B2B start-up scaled. \u00a0If a small team of 20-40 could get you to $100m+ in ARR. \u00a0And given the massive growth of some AI apps today, we are seeing that now repeatedly. \u00a0A Small But Mighty Team getting all the way to $20m, $50m, $100m ARR with AI-first apps.<\/p>\n<p>But there are three issues before you try to replicate this fully, at least after the early days:<\/p>\n<h3>The first one is that it&#8217;s a competitive world.\u00a0 So folks that are hyper efficient with AI &#8230; may just plow the AI gains back into going even harder.\u00a0 And thus &#8212; hiring more.<\/h3>\n<p>I learned from RevenueCat where SaaStr Fund was the first investor.\u00a0 CEO Jacob Eiting shared this chart with me of how much more &#8220;efficient&#8221; the company has become since adopted AI dev tools like Cursor and Windsurf.\u00a0 You can see the huge gain in PRs (and thus output) here since last last year.\u00a0 Huge gains:<\/p>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter size-full wp-image-311233 lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2025\/04\/Screen-Shot-2025-04-07-at-4.52.00-PM.png?resize=1000%2C346&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"1000\" height=\"346\" data-srcset=\"https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/Screen-Shot-2025-04-07-at-4.52.00-PM-980x339.png 980w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/Screen-Shot-2025-04-07-at-4.52.00-PM-480x166.png 480w\" data-sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1000px, 100vw\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 1000px; --smush-placeholder-aspect-ratio: 1000\/346;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter size-full wp-image-311233\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2025\/04\/Screen-Shot-2025-04-07-at-4.52.00-PM.png?resize=1000%2C346&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"1000\" height=\"346\" srcset=\"https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/Screen-Shot-2025-04-07-at-4.52.00-PM-980x339.png 980w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/Screen-Shot-2025-04-07-at-4.52.00-PM-480x166.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1000px, 100vw\" \/><\/noscript><\/p>\n<p>But &#8230; but &#8230; what did they do with those gains?<\/p>\n<p>They have 40% market share in their space &#8212; managing mobile subscriptions.\u00a0 But they have competition and can&#8217;t rest on their laurels.\u00a0 And they are doubling down and hiring even more to keep these gains going.<\/p>\n<p>Net net, if the average RevenueCat engineer is twice as efficient as before AI dev tools (and it&#8217;s not that simple. but close enough) AND they then double their hiring &#8230; now they are moving 4x as quickly.<\/p>\n<p>That&#8217;s fast, and you can see it in their product launches.\u00a0 Much faster than 12-15 months ago.\u00a0 Much faster.<\/p>\n<p>So you can take your AI efficiency gains and smile and talk about how efficient you are.\u00a0 But what if your competitor gets the same gains, and then goes around and reinvests that output into even more great developers?<\/p>\n<p>You&#8217;ll fall behind.<\/p>\n<h3>The Second &#8220;Problem&#8221; With Small But Mighty AI Teams &#8230; Is Enterprise Sales<\/h3>\n<p>A tiny team can be fairly efficient with a 100% self-serve and PLG motion.\u00a0 But &#8230; what about when bigger companies want to buy?\u00a0 You can see in our recent CRO Confidential deep dive with red hot Windsurf\u00a0 \/ Codeium&#8217;s VP of Sales that already they are up to almost 100 sales and GTM professionals.\u00a0 In a handful of months!<\/p>\n<p><iframe title=\"How Windsurf Built A Billion-Dollar AI Leader and a Winning Sales Machine\" width=\"1080\" height=\"608\" data-src=\"https:\/\/www.youtube.com\/embed\/eB_ZISb4EWE?feature=oembed&#038;enablejsapi=1&#038;origin=https:\/\/www.saastr.com\"  allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/p>\n<p>If you want to compete in bigger deals, in the enterprise, you probably have to do the same.<\/p>\n<h3>The Third Problem is The Intense Pressure to Be Multi-Product and Even a Compound Start-Up Today<\/h3>\n<p>Most of the Small But Mighty Teams I\u2019ve seen \u2014 and I\u2019ve run one in many ways \u2014 really just manage one big product at scale. \u00a0But if you have to have 3-4 products now to compete even at $2m ARR, or even just at $5m \u00a0or $10m ARR, how can you do that with just one team?<\/p>\n<h3>So that 30 person, $100m ARR AI B2B start-up?\u00a0 It&#8217;s possible.\u00a0 For sure. \u00a0We have examples now. \u00a0It&#8217;s even cool.\u00a0 \u00a0But &#8230; But &#8230; can the Small and Mighty Startup compete that way in the coming years?\u00a0 And can it sell and scale sales?<\/h3>\n<p>I&#8217;m not so sure.\u00a0 At least, I think the answer, is not always.<\/p>\n<p>Efficiency is a wonderful thing.\u00a0 But AI is also making the world incredibly competitive.\u00a0 Even in spaces that didn&#8217;t used to be all that competitive.<\/p>\n<p><a href=\"https:\/\/www.linkedin.com\/posts\/harryglorikian_tiny-teams-giant-valuations-what-ais-activity-7326300596641148930-p-R8?utm_source=share&amp;utm_medium=member_desktop&amp;rcm=ACoAAAAsKtMBHQPJ9rgxpUs8M6pSxrAYCXIX8oY\"><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter  wp-image-313013 lazyload\" data-src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2025\/04\/small-scaled.jpeg?resize=651%2C809&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"651\" height=\"809\" data-srcset=\"https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/small-scaled.jpeg 651w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/small-480x596.jpeg 480w\" data-sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) 651px, 100vw\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 651px; --smush-placeholder-aspect-ratio: 651\/809;\" \/><noscript><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter  wp-image-313013\" src=\"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2025\/04\/small-scaled.jpeg?resize=651%2C809&#038;quality=70&#038;ssl=1\" alt=\"\" width=\"651\" height=\"809\" srcset=\"https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/small-scaled.jpeg 651w, https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/small-480x596.jpeg 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) 651px, 100vw\" \/><\/noscript><\/a><\/p>\n<p>Most of us are having to step up much more just to keep up.<\/p>\n<h3>And a related deep dive on GTM in 2025 and Beyond here:<\/h3>\n<blockquote class=\"wp-embedded-content\" data-secret=\"2PWLcfIXUG\"><p><a href=\"https:\/\/www.saastr.com\/sam-blond-jason-lemkin-gtm-in-2025-how-its-changed-how-its-changing-and-what-hasnt-changed\/\">Sam Blond + Jason Lemkin &#8220;GTM in 2025:  How It&#8217;s Changed, How It&#8217;s Changing, and What Hasn&#8217;t Changed (Yet)&#8221;<\/a><\/p><\/blockquote>\n<p><iframe class=\"wp-embedded-content lazyload\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; visibility: hidden;\" title=\"&#8220;Sam Blond + Jason Lemkin &#8220;GTM in 2025:  How It&#8217;s Changed, How It&#8217;s Changing, and What Hasn&#8217;t Changed (Yet)&#8221;&#8221; &#8212; SaaStr\" data-src=\"https:\/\/www.saastr.com\/sam-blond-jason-lemkin-gtm-in-2025-how-its-changed-how-its-changing-and-what-hasnt-changed\/embed\/#?secret=Ghl3B51n4r#?secret=2PWLcfIXUG\" data-secret=\"2PWLcfIXUG\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-load-mode=\"1\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>So it&#8217;s become a thing with many founders and VCs to think how far you can go in AI today.\u00a0 Many of the early break out leaders in AI for B2B and otherwise have been &#8220;small but mighty teams&#8221;. \u00a0And it\u2019s not a completely new vibe. \u00a0Instagram had just 13 employees when Facebook acquired it&#8230; <br \/><a class=\"more-link fade\" href=\"https:\/\/www.saastr.com\/the-problem-with-small-but-mighty-ai-start-ups\/\">Continue Reading<\/a><\/p>\n","protected":false},"author":19,"featured_media":311234,"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":"default","_twitter_share_type":"default","_linkedin_share_type":"default","_pinterest_share_type":"default","_linkedin_share_type_page":"","_instagram_share_type":"default","_medium_share_type":"default","_threads_share_type":"","_selected_social_profile":[]},"categories":[24898,31,24987],"tags":[],"class_list":["post-311232","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ai","category-blog-posts","category-saastr-ai"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2025\/04\/maxresdefault-2-scaled.jpg?fit=1000%2C563&quality=70&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p5oib2-1iXS","jetpack_sharing_enabled":true,"fifu_image_url":"https:\/\/www.saastr.com\/wp-content\/uploads\/2025\/04\/Screen-Shot-2025-04-07-at-4.52.00-PM.png","_links":{"self":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/311232","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\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/comments?post=311232"}],"version-history":[{"count":9,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/311232\/revisions"}],"predecessor-version":[{"id":313014,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/311232\/revisions\/313014"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media\/311234"}],"wp:attachment":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media?parent=311232"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/categories?post=311232"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/tags?post=311232"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}