JF

Jared Friedman

11/23/24

@ Y Combinator

Vertical AI agents are set to replace entire teams and functions within enterprises, showcasing a significant evolution in AI capabilities.

JF

Jared Friedman

11/23/24

@ Y Combinator

The competition among AI models is fostering a fertile marketplace, providing consumers with more choices and opportunities for founders.

JF

Jared Friedman

11/23/24

@ Y Combinator

Many startup founders overlook the potential of vertical AI agents, which are not a new concept but are gaining traction in the market.

JF

Jared Friedman

11/23/24

@ Y Combinator

I believe vertical AI agents will lead to the creation of companies worth over $300 billion, similar to the early SaaS boom.

JF

Jared Friedman

11/23/24

@ Y Combinator

Silicon Valley has predominantly funded SaaS companies, with over 40% of venture capital going to this sector, resulting in more than 300 SaaS unicorns in the last 20 years.

JF

Jared Friedman

11/23/24

@ Y Combinator

The introduction of XML HTTP requests in 2004 was a catalyst for the SaaS boom, enabling the development of rich internet applications.

JF

Jared Friedman

11/23/24

@ Y Combinator

The shift from traditional software to SaaS was driven by the realization that sophisticated enterprise applications could be effectively delivered over the cloud.

JF

Jared Friedman

11/23/24

@ Y Combinator

The incumbents in the software industry often avoid entering B2B SaaS markets because they lack the deep domain expertise required to address specific customer needs.

JF

Jared Friedman

11/23/24

@ Y Combinator

Vertical B2B SaaS companies can provide significantly better user experiences compared to traditional enterprise software, which often suffers from being a jack of all trades but master of none.

JF

Jared Friedman

11/23/24

@ Y Combinator

The pricing structure in software typically falls into three categories: $5 per seat, $500 per seat, or $55,000 per seat, corresponding to consumer, SMB, and enterprise sales.

JF

Jared Friedman

11/23/24

@ Y Combinator

The perception that enterprise software is inherently poor stems from the fact that the end users are not the ones making the purchasing decisions, leading to mismatched priorities.

JF

Jared Friedman

11/23/24

@ Y Combinator

As AI and large language models evolve, startups may need to hire more software engineers who understand these technologies to automate processes and drive growth post-product market fit.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

We're at the beginning of a revolution where companies could operate with as few as 10 employees, leveraging AI to handle tasks traditionally done by larger teams.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

The trend of using engineers for marketing tasks was already underway before large language models (LLMs) became popular, as seen in my experience with Triplebyte.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Having an engineer manage marketing efforts can be more effective than hiring traditional marketing executives, as they can leverage their technical skills to optimize campaigns.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

I believe there could be 300 vertical AI unicorns, as every SaaS unicorn could have a corresponding vertical AI equivalent that combines software and human expertise into one product.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Enterprises are currently uncertain about the AI agents they need, but experienced founders are focusing on creating customizable AI solutions for them.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

The early winners in the AI space may be general-purpose solutions, but vertical AI agents will emerge as industries develop and require more specialized tools.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Enterprises are already accustomed to the value of point solutions, making them more likely to invest in startups offering vertical AI agents.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Vertical AI agents could potentially be ten times larger than the SaaS companies they disrupt, as they can replace not only software but also reduce payroll costs significantly.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

AI can now fully automate processes that previously required human teams, such as QA testing, allowing companies to operate without traditional roles.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

The market for AI customer support agents is crowded, but many existing solutions are inadequate for complex workflows, leaving room for more sophisticated entrants.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Only a few companies are attempting to create advanced customer support solutions that can replace entire teams, indicating a significant opportunity in the market.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

We're in the early stages of vertical AI agents, which could lead to the emergence of $300 billion companies in this space, rather than a single trillion-dollar SaaS company.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Vertical AI agents are designed for specific tasks, like automating customer support for niche markets, which makes them more efficient than general-purpose solutions.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

The theory of the firm suggests that companies will only grow to a point where they become inefficient, leading to the need for specialized networks and ecosystems.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

As AI tools for managers and CEOs become more powerful, they could significantly increase the scale of firms, allowing one person to manage more effectively.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

AI can extend the number of meaningful relationships a manager can maintain, potentially surpassing the traditional limit of 150 connections.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

AI voice calling technology is automating tasks like debt collection, which traditionally required a large workforce, thus reducing costs and improving efficiency.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Companies like Salient are successfully implementing AI voice technology to automate customer interactions, demonstrating the rapid growth in this sector.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

To find a successful vertical AI startup, look for repetitive, boring administrative tasks that can be automated, as these often present lucrative opportunities.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

Successful vertical SaaS companies often emerge from founders' personal experiences with tedious tasks, leading to innovative AI solutions.

YC

Y Combinator Cast

11/23/24

@ Y Combinator

In vertical SaaS, the most promising opportunities lie in automating mundane, repetitive jobs that are currently labor-intensive.

Vertical AI Agents Could Be 10X Bigger Than SaaS

Takeaways