Most AI Companies Won’t Survive (Tech Investor Explains)

Advice for AI Founders to Exit in 12-18 Months00:00

Founders running successful AI companies should take a cold hard look at exiting in the next 12 to 18 months, which might be a value maximizing moment for outcomes. This draws from the dotcom bust and survival rates.

Historical Precedents: 90-99% of Tech Cycle Companies Fail00:30

In every technology cycle, 90-95% or 99% of companies go bust, dating back to the automotive industry in Detroit with dozens of car companies and hundreds of suppliers collapsing into a small number. During the internet bubble of the '90s, 450 companies went public in 1999, 450 in the first few months of 2000, and another 500,000 in the couple years before, totaling 1,500-2,000 that went public. Of those, only a dozen or two dozen survived; 1,980 or so went under or got bought for a little bit. Every cycle is like that: SaaS, mobile, crypto. Most AI companies won't make it; a handful will.

Characteristics of Durable AI Companies

AI founders should ask: What is the nature of your company's durability? Are you one of the dozen or two that will be really important 10 years from now, or is now a good moment to sell because your work will get commoditized, competed by a lab, or become obsolete due to market or technology shifts? A handful of companies should never sell or exit; they should keep going. For every company, there's a value maximizing moment, usually a 6-12 month window where what you're doing is important enough and scaling before a headwind hits. Sometimes the headwind is predictable, visible in the second derivative of growth plateauing.