Some investors are still dismissing most AI startups as "GPT wrappers" -- i.e. they think companies that are using OpenAI or Anthropic will quickly get replaced or have no moat, since every company has access to these models. This is a flawed mental model. You can easily see the flaw if you think of OpenAI and Anthropic as providing intelligence, just as humans provide intelligence. You would never dismiss "a company that hires people" as "a human wrapper" and claim there's no moat because anyone can hire people. Instead, you have to think more deeply about accumulating advantages, network effects, product, expansion opportunities, etc. There are almost no YC startups that are literally just building a thin wrapper on OpenAI or Anthropic. They are all building real products, understanding customer problems, developing features that anchor them deeper into workflows, and solving problems that can't just be solved by using ChatGPT. A better general way of thinking about AI startups is The Black Hole Model, which I've talked about here before.
Dropbox was just an Amazon S3 wrapper!
Thoughtful insight.
Tim Suzman normally I really like your posts but this is word soup. Its like trying to address a technical aspect without actually touching on substance. Any company that is "just" an API integration, regardless of the sector has a low moat. End, full stop. However, the KPI and actual business value may be less about technology and more about community. (One example and I can list a bunch of others) Competitors can't copy communities. Show me some simple trash AI start-up but it has 1m MAU, good retention and low CAC. I'd overlook the technology backend and start focusing more on their brand strength and how this growth may scale, stall or collapse (myspace/Yahoo)
The "human wrapper" is a great way to frame this. I've used a similar analogy when people dismiss AI as a "fad". If AI can do large amounts of work that humans can do but at lower cost and higher speed then it's difficult to see how it can go out of fashion. Similarly, off-shoring offered clear cost savings - it was never going to just be a fad, although companies have come to appreciate the trade-offs more clearly over time.
100%. And if I may, the idea of the moat itself is counterproductive while building. Moat is emergent. The only thing you can build for is customers paying to solve a problem. I've yet to encounter a customer describing their SOW as 'need AI or tech X to solve my problem'.
Except that there isn't a couple of companies owning the complete rights to every possible employee on the planet. If tomorrow, the handful of companies providing access to LLMs close the ability to wrap them, what is the alternative for GPT wrappers?
They'll look back and see how dumb they sounded when the opportunities they lost become successful. Are the thousands of startups using AWS, Amazon wrappers? 🤔
Yes, the right data, the right questions + AI is my moat. And no, you probably can't do this yourself in a couple of hours so it's worth it.
#cfbr very true. Despite gen AI is already invented and we don't need just another one. I think the future products are exactly using these wrappers to solve problems. Uber was just a Taxi wrapper
Co-founder & CEO, Coverage Cat
10mo"human wrapper" is the next ironic eminem album