How does the inclusion / exclusion of AI impact your startup's valuation?

Summary

The transcript discusses the ambiguity of AI components within startups and their impact on valuation multiples. It highlights the difference between core AI technology and using AI as an efficiency tool. The speaker expresses skepticism about businesses relying solely on existing AI models like GPT or Claude, suggesting they lack a sustainable future. Instead, AI should be integrated to enhance customer service or operational efficiency. The transcript also touches on the challenges of rehospitalization in healthcare and a startup's approach to using AI for predictive analytics to prevent it.

Takeaways

• 🧠 The speaker discusses the ambiguity of what constitutes an 'AI component' in a business, suggesting it could range from core technology to a modern tool for efficiency.
• 🤖 They mention that every innovative tech company claims to use AI, making it difficult to define a typical multiple for startups with AI components.
• 💡 The importance of distinguishing whether AI is a core technology or an adapted solution like using open AI, chat GPT, or Claude in a low-code, no-code manner is highlighted.
• 📈 The speaker implies that the valuation multiple could vary greatly, from traditional business multiples to those heavily influenced by the current appreciation for AI.
• 🏥 The speaker is building a health tech company that uses technology and AI to empower healthcare, aiming to reduce rehospitalization rates post-discharge from home health.
• 📊 The AI in their health tech company analyzes data from various health monitoring devices to predict and prevent rehospitalization risks for patients.
• 🚫 The speaker expresses skepticism about the future of companies that are primarily based on large language models, suggesting they can be easily replicated and may not be sustainable.
• 🔮 The script suggests that using AI to modernize customer service or increase efficiency can make a difference but doesn't necessarily increase the company's valuation.
• 💼 The speaker believes that integrating AI to make a company more efficient and profitable is different from basing a company solely on AI technology.
• 📉 They argue that companies relying on existing language models as their core business are not interesting and may face obsolescence within the next year and a half.
• 🛡 The risk profile of a company might increase if AI is merely an add-on rather than integral to the business model.

Q & A

What is the ambiguity regarding AI components in a startup business model?

The ambiguity stems from the broad application of AI in tech companies, where almost any innovative tech company might claim to use AI in some form. This makes it difficult to distinguish the significance of AI within a startup's core technology versus it being a general tagline or feature.

How does the definition of an AI component affect the startup's valuation?

If AI is a core part of the technology, it may command a higher valuation, similar to companies like OpenAI. However, if the startup is merely using existing AI platforms in a low-code or no-code manner, the valuation might be more aligned with traditional business multiples.

What is the range of multiples for startups with AI components?

The multiples can vary greatly, from traditional business multiples for those using AI as an efficiency tool, to potentially higher multiples for those heavily weighted on AI innovation, reflecting the current market appreciation for AI.

Why might using existing language models as a core business not be sustainable in the long term?

Using existing language models like GPT or Claude as a core business model may not be sustainable because these models can be easily replicated by competitors, and the rapid pace of AI development could render them obsolete within a short period.

What is the speaker's opinion on companies that base their business on large language models?

The speaker does not see a future in companies that base their entire business on large language models, as they view these models as easily replicable assets that may lose their competitive edge quickly.

What is the speaker's background and current project?

The speaker has a background in health tech and is currently building a health tech company that aims to empower healthcare with technology and AI.

What is the problem the speaker's health tech company is addressing?

The company is addressing the issue of high rehospitalization rates among patients discharged from home health care, with a focus on preventing rehospitalizations by keeping patients at home.

How does the AI component in the speaker's health tech company work?

The AI component uses data from various health monitoring devices to predict when patients are at risk of rehospitalization, enabling timely interventions to keep them at home.

What is the significance of using AI in the health tech startup mentioned in the script?

The AI is significant as it processes data from health monitoring devices to make accurate predictions, which is crucial for preventing patient rehospitalization and improving healthcare outcomes.

How does the AI enhance the efficiency and profitability of the health tech startup?

The AI helps in making the company more efficient by accurately predicting patient health risks, allowing for targeted interventions and potentially reducing costs associated with rehospitalizations.

What is the potential impact of the health tech startup on the healthcare industry?

The startup could significantly reduce healthcare costs by decreasing rehospitalization rates and improving patient outcomes through the use of AI for predictive analytics in home healthcare.

Outlines

00:00

🤖 AI Components in Business Valuation

The speaker discusses the ambiguity in valuing startups with AI components, noting that almost every tech company claims to use AI. They differentiate between AI as a core technology and AI as a tool integrated into existing solutions. The speaker suggests that using AI to enhance efficiency or customer service is valuable, but warns against businesses that rely solely on existing AI models like GPT or Claude, predicting they may not have a sustainable future. They express a lack of interest in companies that are merely using AI as an add-on, rather than those that are fundamentally built on AI technology.

05:01

🏥 AI in Health Tech: Preventing Rehospitalization

The speaker introduces their work in health tech, focusing on a company that uses AI to prevent rehospitalization after home health discharges. They highlight a significant gap in the market, with a high percentage of patients returning to the hospital within a year. The company installs devices and maintains weekly communication with patients to monitor health metrics such as blood pressure, weight, blood sugar, and other vital signs. The AI system processes this data to predict and prevent potential health crises that could lead to rehospitalization, aiming to keep patients healthy at home.

Keywords

💡Multiples

In the context of startups and business valuation, 'multiples' refer to the ratio of a company's value to its earnings or revenue. It is a key metric used by investors to assess the price they are paying for each unit of earnings the company generates. In the script, the speaker is discussing the typical multiples for startups that incorporate AI components, indicating the ambiguity in valuation due to the varying degrees of AI integration.

💡AI-Driven

The term 'AI-Driven' describes businesses or technologies that are primarily powered by artificial intelligence. It implies that AI is at the core of the company's operations and strategy. The script mentions that while the startup in question is not primarily AI-driven, it does have AI components within its business model, which affects its valuation and potential.

💡Business Model

A 'business model' outlines how a company creates, delivers, and captures value. It defines the target customers, value proposition, channels, customer relationships, revenue streams, key resources, key activities, key partners, and cost structure. The script discusses the importance of understanding whether AI is a core part of the business model or just an added feature.

💡Innovative Tech Company

An 'innovative tech company' is one that introduces new technologies or applies existing technologies in new ways to create value. The script points out that many tech companies, innovative or not, are now including AI in their operations, which can blur the lines when evaluating the significance of AI in their business.

💡Core Technology

The 'core technology' of a company refers to the fundamental technological capabilities that form the basis of its products or services. The script suggests that if AI is part of a startup's core technology, it may command a higher valuation multiple, as seen with companies like Open AI.

💡Low-Code/No-Code

'Low-Code/No-Code' refers to software development approaches that allow users to create applications with minimal or no coding. The script mentions that integrating AI platforms like Chat GPT or Claude into existing solutions using these approaches may not be as valuable as having AI as a core component.

💡Health Tech

Health Tech, short for 'Health Technology,' involves the use of technology to improve health outcomes, enhance efficiency, and reduce costs in healthcare. The speaker in the script is building a health tech company that uses AI to predict and prevent rehospitalizations of patients.

💡Rehospitalization

Rehospitalization refers to a patient being readmitted to the hospital after being discharged. The script discusses a significant gap in the market related to preventing rehospitalizations, which the speaker's health tech company aims to address with AI and technology.

💡Data Integration

Data integration is the process of combining data from different sources into a single location to provide a unified view of business information. In the script, the speaker's company collects data from various health monitoring devices, which is then integrated and analyzed by AI to predict patient health risks.

💡Risk Prediction

Risk prediction involves the use of data analysis to forecast the likelihood of certain outcomes, such as rehospitalization in the case of the script. The speaker's health tech company uses AI to analyze integrated health data and predict when patients are at risk of needing to return to the hospital.

💡AI Component

An 'AI component' in a business refers to the part of the company's operations or products that involve artificial intelligence. The script discusses the ambiguity in what constitutes an AI component and how it affects a startup's valuation, whether it's a core technology or an integrated feature.

Highlights

Ambiguity in defining what constitutes an 'AI component' in a business model.

The prevalence of AI in tech companies' marketing and the challenge it poses in evaluating AI's true impact.

The distinction between a company primarily driven by AI and one that integrates AI into its existing solutions.

The potential for high growth in tech startups that utilize AI in a low-code or no-code manner.

The wide range of business multiples for companies with AI components, from traditional to heavily AI-focused.

The skepticism towards businesses that rely solely on existing AI models like GPT or Claude without proprietary technology.

The importance of AI in modernizing customer service and increasing business efficiency.

The risk profile of companies that are merely add-ons to existing AI technologies.

The potential lack of future in companies that are based on large language models without a unique value proposition.

The rapid pace of AI development and the challenge it poses for businesses relying on current AI models.

The unique approach of a health tech company that uses AI to prevent patient rehospitalization post home health discharge.

The significant gap in the market for post-discharge care and the opportunity for AI to fill this void.

The use of AI to analyze patient data from various health monitoring devices to predict rehospitalization risks.

The integration of AI in a healthcare company that aims to keep patients at home and out of hospitals.

The practical application of AI in healthcare to improve patient outcomes and reduce healthcare costs.

The nuts and bolts of how AI is 'empowered' in a healthcare setting to make a tangible impact.

The innovative use of AI in predicting patient health risks based on data from blood pressure cuffs, scales, and other instruments.

Transcripts

see what are the typical multiples for

startups that are not primarily AI

driven have ai components within their

business model uh ideally I'd love to

what someone used the reference of

phoning a friend earlier and uh I wish I

could phone a friend that's more

specific to AI I don't see a lot of AI

opportunities but I mean it's I I would

say just the way that this question is

written at least that if you have an AI

component to the business there's a

little bit of ambiguity behind that

because arguably you could go to any

Innovative tech company and on the

homepage of their website right now it's

going to have some sort of tagline about

how they're using AI to their advantage

right and every big interprise software

has started doing this for for a while

now so I think it depends on the

underlying definition of what an AI

component is right is it part of your

underlying core technology you know

great it's look no further than than you

know the open Ai and the and the figures

of the world to kind of get your answer

there in terms of a potential multiple

uh however are you adapting open AI chat

GPT Claude other existing platforms into

your existing solution in kind of a low

code no code way that's probably pretty

fundamentally different and arguably

something that any you know kind of high

growth or technology centered business

could be doing like low code no code for

Tech startups and and tech companies in

general something that you you're

looking at for lean and mean yeah so so

like th this again like this all depends

on the AI component you're talking about

it could literally range

from you know I mean a a practical kind

of traditional business multiple of you

know uh a few turns of of Leverage

against IA or or a few times against

Topline all the way up to something

that's that's pretty weighted pretty

heavily it's the current kind of I don't

want to call it hype the current current

appreciation for AI that's happening

right

now essentially if you're using a

already existing language model that

exists on the market as your model as

your core business it's not much of a

it's not much of a business going down

the road but using it to you know

accentrate or you know modernize your

your your customer service or something

within your business itself I mean that

makes a difference and of course it's

like using any kind of modern tool to be

more efficient but I mean I I me does

that increase the risk profile though if

they're liary it's just an add-on but

basically if it's a company goes yeah

we've introduced large language models

into our company to actually make us

more efficient and more profitable or

more customer friendly and all that

that's one thing but the separate thing

is our companies based on large language

models is in my opinion just my opinion

you guys I don't see a future in that is

like we have a profitable business that

is helping all this this or this and

we're using chat GDP and Claud as our

our engine like I don't that's already a

piece of asset that can be copied

anywhere and we'll probably run out in

the next year and a half as as fast as

this is moving so I don't find those

companies

interesting actually I know based on

your background in health Tech are you

looking at certain indicators or certain

multiples when acquiring a health tech

company yeah so I'm actually building a

health Tech Health tech company right

now that is really a healthc care

company that's empowered by by Tech and

AI it's been a lot of what what does

that actually mean empowered by like

what does that mean nuts and bolts yes

and so just a really quick pitch on it

so when patients discharge from home

health there is a massive gap for what

they do right they they discharge from

home health and then about 68% of them

end up back in the hospital within the

first year and there's just really a gap

in the market that nobody's taking and

so what we're what we're doing is we are

getting a team team that is installing

devices and and has Communications with

these patients on a weekly basis to stop

their rehospitalizations keep them at

home and so what the AI does is so we

have blood pressure cuffs we have scales

instruments to measure blood sugar and

four or five other measurements and so

what that does is it feeds into our

system and then the AI takes all of the

data that we have and is able to

accurately predict when they're going

when they're at risk to to go to to have

factors that are going to lead to

rehospitalization