ChatGPT isn't the startup platform you've been waiting for

hey, here's a few thoughts from today

Since my last newsletter I've thought more about ChatGPT, and whether or not it's a good opportunity for bootstrappers.

If you'd like to read last week's thoughts + this week's in once place, I've posted it online here:

Why ChatGPT is not a traditional startup platform

Historically, bootstrapped startups have been built on top of open protocols (such as email, the web, and RSS), open platforms (like WordPress), and open-source tools (including Ruby on Rails, Laravel, Vue, and Tailwind CSS).

These indie founders used open protocols and open-source tools to level the playing field and give their ideas a chance to succeed. MailChimp and ConvertKit, for example, harnessed the email protocol without paying a single cent to Gmail or Microsoft for API access or postage fees.

Even more important, nearly every SaaS application leverages web browsers as their "platform" for launching their software product. There are no licensing fees for loading your web app in Chrome, Safari, Edge, or Firefox.

Early bootstrapping successes, such as 37signals, triumphed because of the open web. Built with Ruby on Rails (open source), accessed through the web browser, and promoted through their blog, Basecamp managed to carve out a thriving business despite competition from giants like Microsoft Project.

For decades, software startups built on the open web were more agile than their (larger) competition. They could move faster, leverage open source, and deploy new versions seamlessly to the web.

Web 2.0 democratized the software industry, giving smaller, bootstrapped companies a unique advantage. Indie founders could differentiate through simpler products, distinctive branding, and creative distribution channels. Usually, the only thing "cost of goods sold" was hosting. Most of the tech you built on top of was free, open-source, or open protocols.

However, the world of Web 2.0 startups wasn't without its challenges. Some founders built upon large, centralized platforms, often to their detriment. Twitter developers faced setbacks when their API access was blocked, while Shopify app creators saw their features integrated into the Shopify product. This became known as platform risk: where the platform changes its policies, algorithms, or features, which can negatively impact the startups built on it.

The risks of building your startup on ChatGPT (or other AI platforms)

OpenAI's ChatGPT is not open. Their source code is closed, and you must pay for API access. OpenAI also just announced their plugin store, a central marketplace they control.

By relying on ChatGPT, startups face the same platform risks they've encountered on Twitter, Facebook, and other centralized platforms. OpenAI has the power to:

  • Incorporate your product's features into their main ChatGPT offering
  • Increase the cost of API access
  • Control who is featured in the ChatGPT plugin store

Already, founders are noticing the costs of GPT4 vs GPT3:

twitter profile avatar
Marc Köhlbrugge
Twitter Logo
Twitter Logo
March 30th 2023

OpenAI presents a particularly potent version of platform risk. As consumers increasingly adopt and pay for ChatGPT directly, the platform's influence resembles Google Search more than the Shopify Store.

Ben Thompson, in his article "The Accidental Consumer Tech Company," highlights this dynamic:

The most obvious business model for the research-focused company was the OpenAI API, access to which was sold on a usage basis. Then came ChatGPT. Within a matter of weeks ChatGPT had over 100 million users, marking the fastest growth of a consumer app ever, and by all accounts it’s still growing rapidly; OpenAI, whether they intended to or not, suddenly found itself a consumer tech company.

In reality, many consumers are happy to access ChatGPT directly, bypassing the need for intermediary products.

Typically, markets have a "main product" that captures most of the value in a category (I describe this further here), and ChatGPT has emerged as the primary source of value in its domain.

The remaining opportunities for ChatGPT-based products will likely be integrated into existing products as additional features. With their market share, customer relationships, and use cases, established companies can easily incorporate AI as a value-add.

Unlike past technological breakthroughs, it's been surprising to see how fast mature companies like Microsoft have been able to incorporate AI/ChatGPT features within their existing apps.

This trend significantly reduces the demand for intermediary products, often developed by indie bootstrappers. For instance, customers may question the need for a standalone AI-driven transcription product when such functionality is already available in apps they use, like Descript, Microsoft Office, or Google Docs.

Ultimately, this landscape leaves fewer opportunities for small startups.

We're already seeing this dynamic play out:

twitter profile avatar
Aaron Yang
Twitter Logo
March 24th 2023

If you have thoughts, feel free to reply to this email.

Or, you can reply to this twitter thread:

twitter profile avatar
Justin Jackson
Twitter Logo
Twitter Logo
March 29th 2023

If you liked this, please share it!

Justin Jackson

🐘 Find me on Mastodon
⚡ Join me on MegaMaker

PS: we just announced some exciting news at Transistor!

Suite 1, 3000-30th Street, Vernon, BC V1T 2C1
Not getting what you need? Unsubscribe

Key phrases

Older messages

Is ChatGPT the next big bootstrapper opportunity?

Saturday, March 25, 2023

hey, here's a few thoughts from today Lately, I've been getting an increasing number of DMs from founders trying to launch new products built on top of ChatGPT. They ask me for my advice, and

Price that product

Saturday, March 18, 2023

hey, here's a few thoughts from today ​ ​A few weeks ago I told you about my friend Val, who was considering new pricing for his product Blogstatic. I said, "before you can determine which

Update on this marketing experiment

Sunday, March 12, 2023

hey, here's a few thoughts from today As I've mentioned previously, I've contracted Josh Anderton to help update Transistor's marketing site. I think some of the stuff we've worked

Val’s pricing conundrum

Wednesday, March 8, 2023

hey, here's a few thoughts from today Choosing a price for your software is one of the hardest decisions you can make. Changing prices after you've launched is even harder. I was recently

"What happened with you last year?"

Saturday, January 28, 2023

(my 2022 year in review) ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Partnero, Olvin, PROMPTMETHEUS, chamu, Dayby, and more

Wednesday, May 31, 2023

Time block your daily tasks and stop procrastinating BetaList BetaList Weekly PROMPTMETHEUS One-shot Prompt Engineering Toolkit Dayby Time block your daily tasks and stop procrastinating Olvin

Last call ☎️

Wednesday, May 31, 2023

Hey there, A quick reminder that our offer to get 25% off the Growth Program ends tonight at 11:59pm PT. You have about 12 hours left to enroll for $900 (down from the usual price of $1200). As always,

[SaaS Club] From Zero to a Million: SaaS Founders Share Their Growth Journeys

Wednesday, May 31, 2023

Hey Reader I hope you're doing well. Here's a quick round up of what's been going on at SaaS Club: 🎧 Podcast From Zero to a Million: SaaS Founders Share Their Growth Journeys Over the past

🔥, cachegrand, Callendo,

Wednesday, May 31, 2023

Today's Trending Products and Posts. Sync users between SaaS solutions (Google Workspace, Jira, Slack, etc.) View cachegrand The World's Fastest Key-Value Store and Cache! View Callendo

Agenda reveal 📣

Wednesday, May 31, 2023

It's here! View this email in your browser. Sifted Summit 2023 🤩 The Sifted Summit agenda is live 🤩 The team has been hard at work curating an agenda for Sifted Summit 2023. We know you love our

Founder Weekly - Issue 588

Wednesday, May 31, 2023

View this email in your browser Founder Weekly Welcome to issue 588 of Founder Weekly. Let's get straight to the links this week. General Labelbox's Path to PMF: Founders Need to be Contrarian

this is tomorrow (just a heads up)

Wednesday, May 31, 2023

latest digi health trends + AMA with analysts Hi there, Thought you'd like this one: it's a webinar about digital health investment tech trends and what you can expect next for healthcare. My

Announcing the Sifted Summit 2023 agenda!

Wednesday, May 31, 2023

It's here! View this email in your browser. Sifted Summit 2023 🤩 The Sifted Summit agenda is live 🤩 The team has been hard at work curating an agenda for Sifted Summit 2023. We know you love our

🇺🇲 big foundr+ sale for 48 hours only

Wednesday, May 31, 2023

Memorial Day Hi , 48 hours left. We can only keep this special Memorial Day deal for our new foundr+ membership till 11:59 pm this Thursday. Costs less than $7 a day… And will make it easy for you to

💥 Tim Stoddart: The Power of a Personal Brand

Wednesday, May 31, 2023

CreatorBoom - The best content of the week to grow your audience and business. View this on the Web May 31, 2023 "Sometimes magic is just someone spending more time on something than anyone else