Lecture Notes on Vertical AI

Introduction

• Discussion on the evolution of AI agents.
• Full-on vertical AI agents expected to replace entire teams/functions in enterprises.
• Emphasis on the importance of competition in the AI marketplace.

Key Speakers

• Gary, Jared Harge, and Diana - founders of successful startups.

Vertical AI Agents

• Definition: AI tools tailored for specific industry sectors.
• Potential Market Size: Anticipation of $300 billion+ companies in vertical AI.
• Analogy to SaaS: Comparison of vertical AI's growth potential to that of SaaS (Software as a Service).

SaaS Growth

• Historical Context: SaaS companies have received over 40% of venture capital in the last 20 years.
• Examples of Success: 300+ SaaS unicorns generated.
• Importance of XML HTTP Request: Catalyzed the SaaS boom by enabling rich internet applications.

Comparison of Different Opportunity Categories

1. Mass Consumer Products (e.g., email, calendar): No startups succeeded; incumbents dominated.
2. Unexpected Mass Consumer Ideas (e.g., Uber, Airbnb): Startups succeeded as incumbents were slow to react.
3. B2B SaaS Companies: Most billion-dollar companies emerged from this category due to the lack of a dominant player.

Challenges in B2B SaaS

• Difficulty in building all-encompassing software due to diverse requirements across industries.
• Example: Salesforce as an early and successful SaaS company.
• Early skepticism about using SaaS for sophisticated enterprise applications.

AI and its Potential Impact on Enterprises

• AI tools can potentially replace extensive human resources in companies.
• B2B SaaS vs. Vertical AI: Vertical AI may be more efficient and result in smaller teams.

Examples of Vertical AI Companies

• Outset: Utilizing LLMs for survey analysis.
• UMCH: AI agents for QA testing, replacing traditional QA teams.
• Power Help: AI customer support agent with advanced capabilities.
• Salient: AI voice calling for debt collection, improving efficiency in a high-churn job market.

Industry Dynamics

• The shift towards AI verticals may lead to more specialized companies rather than one-size-fits-all solutions.
• AI tools could reshape management capabilities, allowing leaders to manage larger teams effectively.

Hiring Trends in Startups

• Importance of hiring engineers familiar with LLMs for automation.
• Potential for leaner teams as AI takes on more repetitive tasks.

Conclusion

• Vertical AI agents represent the next frontier in SaaS-like solutions, with potential to significantly disrupt traditional enterprise functions.
• Advice for Founders: Focus on boring, repetitive admin tasks for high potential vertical AI opportunities.