“GenAI Squared.” How Can a Product Avoid the Downfall of Most LLM-driven Startups?

🌈 Abstract

The article discusses strategies for Generative AI (GenAI) startups to survive in the highly competitive AI startup landscape. It explores the challenges faced by GenAI startups, such as user readiness for novel UX approaches and the risk of LLM vendors integrating competing functionalities. The article then proposes an innovative "GenAI Squared" (GenAI²) strategy, where the product employs LLMs at two different "tiers" to generate prompts and personalize the user experience.

🙋 Q&A

[01] Challenges Facing GenAI Startups

1. What are the key challenges faced by GenAI startups?

• Despite the surge in GenAI startups, only 17% have reached mid-stage, with the majority remaining at an early stage or without venture capital funding.
• Most users are not yet ready to adopt the novel UX approaches implemented in GenAI products and features.
• The simplicity of developing LLM-based applications results in a rapidly saturated market, and LLM vendors can develop superior LLM-driven applications with even greater ease, leaving no chance for other contenders.

2. What are the risks associated with using LLMs in GenAI products?

• LLM-powered applications can introduce significant risks, as end users can leverage LLMs without relying on specialized applications.
• Attempts to constrain LLM capabilities to facilitate end-to-end solutions for specific user problems can impede product development and compromise market competitiveness.

[02] The "GenAI Squared" (GenAI²) Strategy

1. What is the "GenAI Squared" (GenAI²) strategy?

• The GenAI² strategy involves employing LLMs at two different "tiers" within a product, where the upper-tier LLM outputs influence the context used by the LLM at the lower tier, and the reverse influence also takes place.
• This approach can be used to generate prompts, model user behavior, and guide users through personalized journeys based on the modeling outcomes.

2. How does the GenAI² strategy provide a competitive advantage?

• The inherent complexity in designing a GenAI² product poses a challenge not just for the product developer, but also for competitors.
• The technical implementation of a GenAI² product does not require a significant investment, as it leverages the power of LLMs across two tiers rather than one.
• This strategic approach of investing ingenuity and systems thinking into the product design, while enlisting creative developers to implement the concept, constitutes an "unfair competitive edge."

3. How does the GenAI² strategy differ from a single-tier LLM-based product?

• Utilizing LLM at just one tier of a product leaves it vulnerable to competitors who can easily replicate and potentially improve upon the product concept.
• The GenAI² approach forces competitors to compete on factors like pricing, quality, development and marketing investments, and the speed of development and market experimentation, which are more challenging to match.