Successful AI SAAS startups will be..compound startups

Less 'focused'. More profitable.

Go deep in a vertical and you win big. Stay focused.

Well, this has been the traditional advice from every VC/startup operator over the last 10 years and like with any transformation, the GenAI era calls for new rules.

And the new rule of building startup is (probably)..to build compound startups.

First, what’s wrong with the earlier approach, i.e.more ‘focused strategy’?

In most of the verticals, there is a lot of competition for pointed solutions - and unless you are very lucky, most of the opportunities have already been sucked up by existing players.

Wanna go for breadcrumbs? Sure.

Introducing: Compound Startups?

Rippling CEO, Parker Conrad has an interesting theory around this.

He defines a compound startup as a company that builds multiple products in parallel that are deeply integrated and seamlessly interoperable with each other.

This approach allows companies to solve complex problems related to collaboration across different systems within a business.

Most importantly, compound startups solve for the coordination problem that exists in the teams (marketing doesn’t talk to sales which in turn, hates engg, which has a huge problem with QA, who always look at sales as dumbf**ks who sell anything..and so on).