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.