But otherwise, it does seem that starting a service business is sort of the ultimate "do things that don't scale" strategy.
So there is tons of potential in AI-based tools. Is it there yet? I doubt it. But perhaps yes. Anyone here getting traction in AI for business routine efficiency? Back office? Accounting? Time-keeping? Task dispatching? Email requests dispatching? Audit?
But also possibly, having a sales team running the simple cases (mostly) straight through an AI "junior engineer" before even talking to the more expensive guy.
And for a lot of services there'll be creative ways to squeeze efficiencies from tech/AI. For example roofing businesses used to send a guy to your house to give you an evaluation + quote; increasingly, they now send drones (https://www.roofer.com/).
Microsoft actually seems to specialize in that sort of thing (selling a software product, and then offering some quite expensive, bespoke enterprise consulting services for it). But they are not the only ones, looks around the industry and you'll see it everywhere.
The only real drawback to this model when you're small is that it dilutes your focus and multiplies complexity and cost because you have to manage multiple very different lines of business simultaneously. But if you can overcome those challenges it can make a lot of sense, be an expert at a particular problem, sell a product for the average Joes who have that problem, do bespoke consulting services for the money-laden enterprises who have their own complex versions of it.
Do you know of any examples of small scrappy places that have figured this out? Is there any good writing on what kind of organisational and engineering approaches are necessary to make this step?
It really comes down to your own temperament.
I think micro SaaS solutions for small tiny verticals that are neglected by VC backed firms are the better option.
- They scale better
- Less competition
- Customer service is less of a headache with a physical product or SaaS
- Easier to exit
Asking for a friend.
If the vertical has affiliated trade organizations when you go to their events, you’ll find either very few VC-backed startups or none at all.
The competition will be mainly service businesses without software chops. Sell cheap automation and price sensitive customers will move to your solution.
I find myself at a critical point where I wonder what I should do next. I'm over 40 years old and have accumulated years of experience. Sometimes I feel like Neo when he controls the Matrix. Maybe I've been in the same role for too long, but it doesn't matter what project I'm assigned: I implement it with little difficulty (beyond the time cost, exhaustion, etc.).
On the other hand, despite the confidence they've always had in me, the place where I work is starting to feel hostile. Being an introverted person, I try to figure out if this is something that depends on me (and if I can redirect it) rather than looking for answers where I should. Being introverted, it seems unwise to start something that depends on my social skills. Conversely, every day it seems like new obstacles appear, as if going to a job that I liked 90% now feels like a problem.
I have to say, I work in a flat-structure company where the boss is a megalomaniac who wants to control everything. A good part of the new things we do are his impulsive ideas. The office is filled with figurines (dinosaurs, busts from 80s movies, ...) and motivational quotes. He gives talks about how well he does things and how great it is to work there, but he doesn't improve salaries or do anything to provide training, a better work environment, etc. He also plays dirty tricks on employees, like unexpectedly complicating pre-arranged vacations or trying to delay them without a real reason
While writing this, I realized that the 10% that made me not like the company has always been because of him. And if I don't like it, it's because of him.
The only thing that keeps me tied to this place (besides the money, since I don't live in the opulence of certain regions where software is very well paid) is the entrepreneurial spirit of having done so much in the product.
PS: If someone saw our product, the things we have done with just 4 people (on average), they would be amazed. And, with all humility, a large part of that has been driven by me, which ties me and kills me.
But I'm repeating the OP: start a service business. https://youtu.be/T0fAznO1wA8
A good time to start a business is when you know a lot of people with some pain who could become your customers. Obviously, you should know how to solve their pain better (i.e. making a better design) and more effective than others.
There are lots of existing businesses that are not stupid. Of course a lot will try to integrate AI into their workflows. They have clients, you don't.
> How do you find that first customer? Talk to the people you would have recruited as your first users if you were starting a product company.
How to find customers? Go find them.
> Instead of convincing them to use your product to solve their problem, just solve their problem yourself. Charge more than you would’ve if you’d sold them a product!
They have some pain, and you are trying to convince them to pay more because you are spending your time to solve their problem yourself, but you will use AI.
There are existing businesses that already have pipelines and experience solving their problem, with or without AI.
It's true, but that could be used against any new idea or action in business
Starting a business because you used an AI is pointless. There are way more things you have to know and also don't forget that other people likely know something about AI and/or consulted to incorporate it to their existing business. It just can't be a single/biggest reason to start a business.
Yep, this captures what I'm saying.
> "why is this a better strategy for a startup"
If you can build a differentiated product it's great to do that, but it's a lot more difficult/expensive than it used to be.
Incumbent product companies will pursue full automation, but probably won't compete directly with service businesses because it's not their wheelhouse. E.g. GitHub built Copilot and maybe they'll try to ship a "fully automated" AI software engineer. But until their AI software engineer is actually fully automated (which I would guess is 10 years away at least), they won't be competing with software development agencies.
The article distinguishes between a product business and a service business. In the former, the founders find a problem, build a solution, and then sell that solution to people who have the problem. In the latter, the founders find people who have a problem, and then build a solution for that problem.
In a product business, the risk is that you solve the wrong problem. In a service business, the risk is that you never find a problem to solve.
I used to be a schoolteacher, in schools where teachers tended to be on the verge of retirement. Most of my colleagues used computers because one day their typewriter had been taken away and a computer put in its place. Their technology use tended to be quite basic: emails and basic word processing. Most workflows were unchanged since the typewriter and mimeograph days. Almost all planning was still done on paper, on especially-printed planning books. (We were individually asked whether we wanted week-to-a-page or day-to-a-page when the stationery order was being prepared for the next school year.)
(Lesson planning is not a problem to be solved; I'm just using it as an example of the kind of mindset I was working alongside.)
This is a problem-rich environment filled with people who don't know that many of their problems can be solved by computers. You can't ask these people what problems they want solved, because they don't know that their problems can be solved. You have to have something to show them and point to and talk about before they can grasp the idea that it's even possible to automate some of their work.
However, I speak from a position of privilege. I spent years working in that environment, and I walked away with a list of problems - a list of potential products. If you've only worked in software, you won't know any good problems. You'll know some bad problems, and they'll be bad because your potential customers - other software engineers - are just as capable of building their own solutions as you. In that case, a service business is probably no more risky than a product business.
If you start a product business, your moat is the insider knowledge you have of how to solve the problem you solve. If you start a service business, your moat is your reputation for solving people's problems. If you have no insider knowledge, you start your business with no moat at all, and have to dig it while building your castle, whereas the founder with inside knowledge just has to build their castle within their pre-dug moat.
