Why NOW is the Golden Era to build AI apps.

Quick Overview

The current AI era represents the fourth major product cycle, following the PC, Internet, and Mobile eras, and it is a golden era for building AI applications because it builds upon the existing infrastructure of smartphones and cloud computing, enabling unprecedented adoption and net new revenue generation in both application and infrastructure layers.

Key Points: The AI era builds upon the infrastructure established by the Mobile era, noting that the vast majority of humans now possess smartphones, which is crucial for adoption. The pace of innovation is remarkable, exemplified by the fact that 15% of adults on the planet now use ChatGPT every single week as part of their daily routine. Enterprises are moving past the 'magic trick' phase of AI (like GPT-3.5/4) into real enterprise deployment, saving time and money, as evidenced by a tick up in usage data from companies like Ramp. Foundational to investing in this space are three categories: traditional software going AI native, software eating labor by creating entirely new categories, and building proprietary data models (the 'walled garden'). For applications replacing labor, the value proposition shifts from saving money to generating revenue, as seen with Saliant, which collects 50% more revenue in auto loan servicing. Defensibility relies on becoming a 'system of record' or creating a proprietary data moat, as demonstrated by Eve in legal AI, whose unique case outcome data compounds its competitive advantage. The best companies have 'hostages, not customers,' meaning they build sticky, end-to-end workflows or proprietary data models that incumbent providers cannot easily replicate.

Context: Alex Rampel of the Apps Fund frames the current technological moment as the fourth major product cycle, following the PC, Internet, and Mobile eras, by analyzing the NASDAQ performance over time. This presentation argues that the convergence of massive smartphone penetration and mature cloud infrastructure has created the perfect foundation for the AI era to unlock significant growth and value creation across software development, echoing historical patterns where product cycles drive economic expansion.