Avoiding Death on the Yellow Brick Road
2 days ago
- #Vertical SaaS
- #AI Applications
- #Startup Strategy
- AI application layer opportunities exist beyond the Yellow Brick Road, where labs focus on horizontal tools with high model capability dependence.
- Startups can succeed by solving complex, vertical problems requiring domain-specific knowledge, compliance, and multi-step, agentic workflows.
- Key defenses for startups include data/learning flywheels, managing model variability, cost optimization, and governance, all leveraging focus and deep industry expertise.
- Building off the Yellow Brick Road involves focusing on outcomes, tackling high complexity, and implementing use-case-specific guardrails.
- Examples from sales (11x) and insurance (FurtherAI) illustrate how vertical companies embed intelligence into workflows and adapt to market dynamics.
- Tests to determine if a startup is in the rest of Oz include tools-and-steps complexity, system vs. tool orientation, and alignment with customer P&L outcomes.
- Both labs and startups can win: labs dominate horizontal tools, while startups own systems of work, data capture, and governance in verticals.