AI: Startup Vs Incumbent Value

This post is by Elad Gil from Elad Blog

In each technology wave the value, revenue, market cap, profits and great people captured by startups versus incumbents differs. In some waves it all goes to startups, while in others it goes to incumbents or is split between them. Unexpectedly, the prior wave of value from AI roughly all went to incumbents over startups, despite a lot of startup activity. This post explores that dynamic and posits the current unsupervised learning wave of AI will contain strong startup success, in addition to incumbent value.

Some history

In the first internet wave most of the value went to startups (Google, Amazon, Paypal, Ebay, Salesforce, Facebook, Netflix) while some was captured by incumbents (Microsoft, Apple, IBM, Oracle, Adobe) who extended their franchises onto the internet. Perhaps this was a 60:40 or 70:30 startup:incumbent split.

For mobile, most of the value went to incumbents (Apple, Google, and then every mobile version of an incumbent’s app - e.g. “Mobile CRM” was not a stand alone startup but rather Salesforce on your iphone) while there will still significant capture by startups (Whatsapp, Uber, Doordash, Instagram, Instacart etc). Perhaps this was a 20:80 startup:incumbent split.

Crypto in contrast has been roughly 100% startup capture (Bitcoin, Ethereum, Coinbase, Binance, FTX, etc) with very little participation in value creation by existing financial services or infrastructure companies. Perhaps the biggest incumbent participants in crypto have been semiconductor companies like AMD or NVIDIA whose chips are sometimes used for token mining.

(Please note the term "startup" is meant to mean (Read more...)