Where Are the Killer AI-Native Application Companies?

Ray Rike (0:08)

Welcome back to the AI to ROI big story episode of our podcast. I'm Ray Rike, founder and COO of Benchmarkit.

Peter Buchanan (0:17)

And I'm Peter Buchanan, the managing partner of Newplan. And this week, we're going to cover our September 8th AI to ROI newsletter edition that's hot off the presses today. Where are the killer AI native application companies? And we have to start, Ray, with a confession.

Ray Rike (0:37)

Well, you know, as we were going back and looking at a lot of our newsletter editions over the last month, and then quite frankly, the past few months, we have actually contributed to the issue. There's a real imbalance of the news that we're covering in our newsletter. I mean, more than half of our Friday news and analysis stories that we cover were about AI model companies, the Anthropics, OpenAI, the open weight models, while another like 20 to 30% were focused on semiconductor companies like Nvidia, data centers, and even SAS AI incumbents. So what that said was there wasn't much airspace left to cover AI native application companies, Peter.

In fact, even though they've raised billions and billions of dollars of funding, they accounted for less than 5% of our coverage.

Peter Buchanan (1:29)

They did, but to be fair, their stories haven't broken through in the new sources that we follow and we follow an absolute ton of them.

Ray Rike (1:38)

Before we dive into that, Peter, let's go ahead and hear a word from our sponsors because we have a lot to talk about.

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Peter Buchanan (3:12)

Well, I think it's the story of more money, more money, more money. More money. So in the August 26th analysis by The Information, they found that Anthropic and OpenAI now capture 89 cents of every dollar spent on the 35 largest AI startups. So that's, you know, if Anthropic and OpenAI make 90 bucks, the rest of them make 10

So that's up four and a half points from the same survey last September. So in this operating environment, it's brutal for every AI native application founder to make headway and grow their company at the light speed that their investors and frankly, they want. So the market's so concentrated, Ray, how big is the actual opportunity left for everyone besides the model companies?

Ray Rike (4:17)

Peter, I really do believe in the theory that history is often the best predictor of the future.

I still remember, I was at Netscape. We were the talk of the Internet frenzy, the browser, and then all the billions and billions of dollars that went into the telecommunication companies. That was a story. But if you really look at what the browser and the build out of the Internet caused, it was SaaS and Cloud, which became the story.

I think the same thing is going to happen with AI native applications. But let me talk about some of the directional sizings first. I saw a report the other day that said, AI software is going to hit a trillion dollars by 2030, so three and a half years, up 9X from last year. But let's stop the presses real quick. So number one, SaaS. SaaS is which has been around since 2001-ish, right? Last year, it was about a $300 billion marketplace for Gartner and it's probably going to go up another 20% this year. Now, SaaS isn't the only enterprise software segment. You've got kind of the entire cloud, platform as a service, infrastructure as a service. So if you get all that added together, we're playing close at $850 billion. But that took 20 years to build, Peter. So there's no way that I believe that AI software is going to hit a trillion dollars in three years.