The AI Business Defensibility Problem

How possible is it really to build a business in the new AI space?

With the rise of generative AI, one consistent question is if it’s possible to build a business that’s defensible.

The assumptions here are that most AI products can leverage improving their defensibility by fine-tuning ensemble models on top of the existing. But this isn’t necessarily true and there’s a lot of arguments on why.

What’s the current landscape look like?

As noted previously, the most basic generative AI business you can create is build a user interface on top of a large scale model (GPT-3, Stable Diffusion), and market it towards a specific use case.

The current SaaS AI business models are almost all freemium service. Each business uses a crediting system to make sure that they don’t lose money on free users. And so each business exists on maintaining a free user to customer conversion threshold that will sustain the business — but inevitably lead to saturation as new competitors enter into the space.

The best examples are in content marketing and SEO on GPT-3. Companies like Copy.AI or Jasper have scaled to tens of millions of dollars in annual revenue by making content marketing teams more efficient…