This article examines how startups can survive and win in a world where AI and software tools have significantly lowered the barriers to product development, software, and design. How does a business get past the question, “Why should we use your product when AI can build this overnight?”
Mohit Agarwal is a Transformation leader in a large Private Credit firm, where he drives business change and transformation for a set of global businesses. Previously, he led Transformations for a global management consulting firm based in New York.
Transforming Your Startup to Win in an Increasingly Democratized Development Landscape
Old tools in a new game
Picture this. You’ve found yourself a B2B product idea. You find yourself a co-founder. You raise some money or perhaps bootstrap things. Many nights (or months) later, you’ve developed a terrific product. You’ve read about founder-led sales, so you begin the sales motion with gusto…Only to find that either (A) no one is buying, (B) they’ve already seen something like your product, or (C) they’ve built it by themselves. You go again, only to hit the same wall. You’re dejected and wonder, what went wrong?
Nothing. Just that you were following an old playbook in a new world. You had a product in a world where you needed a business. You hoped to win on technical capabilities, where you needed a whole ecosystem. It's time to transform.
The ever-changing lay of the land
Building software used to require a big team and a lot of money. Front-end engineers, back-end devs, designers, product managers – the list goes on and on. And the dollars to keep them fed. Those days are rapidly disappearing. Today, a general-purpose LLM with the right tools/prompts can do what all these people could – and do it faster – bringing the barriers to entry for product development crashing to the ground.
So what can tools like Claude, GPT, Grok, and the like do? They can:
- Write functioning code from simple language prompts
- Design interfaces that look professional and ready to use
- Generate text, image, and video content
- Automate complex workflows
- Append additional capabilities through APIs and libraries
- And do all of this for rock bottom prices and at warp speed
This democratization is a huge unlock for productivity and innovation broadly, but presents a serious challenge for startups whose value proposition was tied to their technical capabilities, product ideas, or execution speed.
New ways to win
So, how do you win? Why should someone buy your product in this new era? What sets you apart?
Here are four things for any founder to think about to position your startup to win:
1) AI doesn’t know everything. Get domain expertise quickly. That’s your moat.
At the end of the day, a general-purpose AI is a fuzzy absorption of all the information on the internet. It knows little about everything but doesn’t know a lot. It doesn’t know intricate details that can only be accumulated through years of experience. It doesn’t know what potential customers told you during beta testing. It doesn’t know what you learned by talking to 100+ experts in the field. And therein lies the opportunity.
Either have (through years of experience or truly differentiated experience) or build (by talking to customers, experts, etc.) expertise. Translate that to the product and your business – it’s not just knowing how to build something, but knowing what to build in the first place.
2) It’s not a product. It’s a business.
Sure, let’s say AI somehow knew what to build (it usually doesn’t), but AI can only build products. You need to build a business – which means more than just a product, it means:
- A deep understanding and appreciation of the customer’s pain points
- Judgment to apply nuanced decision-making (e.g., when to listen to the customer’s niche product requests and when not to)
- Trust and relationships with customers and members of the ecosystem (let’s say your business needs to overcome regulatory hurdles, where a machine will likely struggle)
- The ability to feed the flywheel of new ideas and know what to build – by attracting and retaining the best talent
- Knowing when to “bend” the rules for customers, e.g., when to allow a late payment, when to give a discount, etc.
The more your value proposition leverages these business elements, the more defensible your position becomes against AI commoditization.
3) Build and sell the network.
AI can build products but can't build a network and community. It can’t magic up virality the same way a founder can. It can’t connect those dots and leverage them to drive further growth. Create a tight network of users who benefit from each other's presence. As Bill Gurley says, “The network must burn bright to enjoy network effects.” Which in turn creates a moat that's incredibly difficult to cross, even with advanced technology.
Anyone with the right tools and capabilities can build the next Strava. They can’t, however, get the 100 local runners in your postcode who you compete with to become the local legend. And without that network, users won’t keep coming back over and over.
4) Continuous Innovation (and knowing when to innovate).
You run the AI prompt. It generates a product that meets user needs. Great. But what happens next? How do you iterate and innovate? How do you know when to (the answer is not always) innovate? How do you know when not to? How do you know when a customer's need has materially changed?
AI excels at creating products that solve problems in established ways. You need to go one step beyond and treat your business as an ever-evolving entity that rapidly responds to emerging needs. The key is establishing a tight feedback loop with customers that helps you understand needs before they become obvious to AI models or competitors. This means:
- Regular, meaningful customer interaction
- Building in public and involving users
- Getting user feedback
- Creating a culture of experimentation and rapid iteration
Play to win
Democratization of development is just another new frontier. This new paradigm makes it harder to differentiate on technical execution alone, but that opens up new opportunities to create value in ways that AI simply cannot replicate.
The startups that will thrive aren't asking, "How do we compete with AI?" but rather, "How do we create value that transcends what technology alone can deliver, and how do we deliver that?"
By focusing on domain expertise, building a business, community effects, and continuous innovation, you can build a startup that doesn't just survive the AI revolution but leverages it to win in ways never before possible, all fueled by the transformative power of AI.
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