Venture Capitalist at Theory

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2 minute read / May 12, 2023 /

Seeking a Distribution Advantage with AI

Great companies transform a technology innovation into a go-to-market advantage.

In the last five major cycles (internet, social, mobile, cloud, web3), startups seized the new technologies of the era to create a distribution advantage.

Google led to search-engine optimization, which startups like Expedia & Zillow grew to become public companies. Mastering social distribution (sheep-throwing in the early days) on MySpace & Facebook’s propelled YouTube & Zynga, not to mention the social networks themselves.

The iTunes store launch in 2008 enabled Uber. Salesforce catalyzed cloud-delivery & annual subscription model in the enterprise, upending decades of selling software with perpetual licenses.

What is the distribution advantage AI confers to startups? There are a few emerging possibilities :

  1. OpenAI plug-in architecture enables companies to build products integrated into a new search & discovery experience. With millions of users to address, a novel plug-in experience could catapult a startup.

  2. Novel content creation techniques used the right way might enable a new form of inbound lead acquisition. AI enables ABM-at-scale. Perhaps, we’ll see the fusion of inbound-marketing & account-based marketing (ABM) in which marketers build bespoke collateral for identified accounts but do this for thousands of prospects rather than the tens or hundreds today.

  3. New user experiences re-imagine the way users try products. The first time a user visits a site AI asks “What do you want to accomplish today?” & then dynamically provisions & configures software to convince a prospect to purchase. I bet that experience would boost the average 4% unassisted conversion rate of freemium software.

  4. Open-source interest has worked phenomenally well for many infrastructure projects. In the past, reaching 1-2k stars (likes for a Github code repository), has taken some startups a few months, but many AI projects have reached tens-of-thousands of stars in a few weeks.

The teams who unlock novel distribution advantages first will have a tremendous competitive advantage in the AI wave.

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