Why Every Startup Needs to Be AI-Native

As consumers, we often utilize artificial intelligence (AI) in our daily routines without even noticing it. Examples include unlocking our phones using facial recognition, having our emails sorted automatically, getting personalized content recommendations from Instagram and TikTok, using navigation tools while driving, converting spoken words into subtitles or transcripts, engaging with chatbots, — and the list goes on.

In this blog, we explore the benefits for a company in building technology and products as AI-native. To help explain the advantages, we feature insights from entrepreneurs and investors who speak from direct experience of the impact.

The Benefits of Being AI-Native

Undoubtedly, AI has become ubiquitous, and in today’s fast-evolving business landscape, the integration of AI is not just a strategic advantage, but increasingly a necessity. Here’s why every startup should consider being AI-native.

1. Enhanced Efficiency and Automation

I predict that, because of artificial intelligence and its ability to automate certain tasks that in the past were impossible to automate, not only will we have a much wealthier civilization, but the quality of work will go up very significantly and a higher fraction of people will have callings and careers relative to today.

— Jeff Bezos, Founder and Executive Chairman at Amazon

AI revolutionizes startup operations by automating repetitive and time-consuming tasks, which allows startups to concentrate on core activities and foster innovation. This automation not only expedites processes and reduces operational costs but also minimizes human error.

According to a survey by HubSpot involving 1,350 professionals, AI significantly boosts employee productivity and efficiency, helping companies accomplish more with fewer resources. Specifically, marketers using generative AI save an average of at least three hours per content piece. Furthermore, sales professionals benefit from an additional two hours and 15 minutes per day by automating manual tasks, and service professionals save over two hours per day through the use of generative AI for quick response solutions.

2. Improved Decision Making

In the past, decision-making heavily relied on insights from experts within specific domains, which were often isolated from each other. However, with the implementation of trained AI systems, expertise can now be collected and shared universally to guide decision making.

— Taylor Chartier, CEO at Modicus Prime (AV portfolio company)

AI systems enable startups to rapidly analyze vast amounts of data and uncover insights that may elude human analysts. This is crucial in the fast-paced environments in which these companies operate, allowing them to make quicker, informed decisions. Data serves as a critical asset; by using predictive analytics and machine learning algorithms, data analysts at startups can identify patterns, predict trends, and extract real-time insights. These data-driven insights are essential for optimizing marketing campaigns, enhancing product development strategies, and driving sustainable growth for new enterprises.

3. Scalability

AI’s scalability is crucial for startups, allowing them to handle increasing workloads and expanding operational scope efficiently as they grow. This scalability ensures that startups can manage growth smoothly without sacrificing performance quality.

For example, Uber Eats, a widely used food delivery app, leverages AI technology to enhance route optimization and provide precise delivery time estimates. The app also employs machine learning algorithms to analyze customer preferences and offer customized meal suggestions.
Last year, it introduced plans to deploy an AI-powered assistant designed to assist users in discovering deals and exploring various food choices.This AI chatbot is capable of responding to user inquiries, making recommendations, and facilitating the reordering of previous meals. That capability helps maintain timely deliveries and high customer satisfaction, demonstrating how AI and ML solutions are essential for sustaining efficiency and facilitating growth in rapidly evolving business environments.

4. Personalization

The last few decades were focused on collecting tremendous amounts of data. Now, AI is unlocking the full value of this data, reducing friction for customers and offering personalization at a scale that was never possible before.

— Monik Pamecha, Co-Founder & CEO at Toma (AV portfolio company)

AI can help startups offer personalized experiences to their customers, which can lead to higher engagement and customer satisfaction. Personalization is particularly important in industries like retail, media, and services where consumer preferences are key.

Toma is a recent Y Combinator W24 participant, innovating in voice AI by offering advanced AI agents designed to streamline and automate phone-based customer interactions for car dealerships. This solution addresses common challenges faced by car dealerships reliant on traditional phone systems, which are typically labor-intensive, costly, and characterized by inconsistent quality, making them difficult to scale. Such inefficiencies often lead to customer dissatisfaction due to prolonged wait times, unnecessary call transfers, and impersonal service.

To transform this outdated model, Toma introduces a voice AI system that not only sounds natural and engaging but also customizes to the customer. This enables car dealerships to design more intuitive and efficient interactions.

5. Go-To-Market

We are seeing startups aggressively adopt AI tooling to accelerate both product development, as well as GTM [go to market]. The boost in productivity and speed is real and quantifiable. This lean-in stance towards adoption of AI makes these companies more attractive investments given their capital efficiency.

— Guru Chahal, Partner, Lightspeed Venture Partners

In HubSpot’s “How AI is Redefining Startup GTM Strategy” report, which polled 1,000+ startup founders globally, 86% of them reported that AI has had a positive effect on their go-to-market strategies. Additionally, nearly 60% indicated that AI tools have enabled them to connect with more qualified sales leads.

The study also revealed that marketing teams are at the forefront of AI integration, with 62% utilizing AI tools, compared to 54% of sales teams. Founders identified marketing as the primary area where AI has significantly influenced their GTM achievements.

6. Customer Insights

AI helps us bring structure to messy and unstructured customer feedback data. We use it to gather all the feedback and interview transcripts from various places and then find key insights, common themes, and trends using cited sources and direct quotes. This allows us to build conviction in how to best serve our users at lightspeed, which is a game changer for early-stage companies like us.

— Hussien Hussien, Co-Founder and CEO at Nen Labs (AV portfolio company)

AI-powered tools equip customer support teams with the ability to track and analyze unstructured data, such as customer sentiment, to identify those at high risk of churn and promptly address their needs. They also enhance a startup’s understanding of its customer base through sophisticated data analysis. These tools utilize AI algorithms that combine predictive analytics with natural language processing (NLP) to analyze thousands of keywords from customer interactions, offering rapid recommendations and automatic alerts. This assists in monitoring and analyzing customer sentiments to anticipate case escalations or potential customer churn.

Moreover, using sentiment analysis to scrutinize customer feedback, these tools help startups gain a deeper understanding of customer perceptions and experiences. This valuable insight allows startups to tailor their marketing strategies and product development more effectively to meet customer needs. It also enables customer service representatives to identify and address potential challenges proactively, thereby preventing churn.

7. Talent Attraction

Top talent is drawn to innovation. By integrating AI at the heart of our operations, we’re not only developing technology, we’re cultivating a team that’s passionate about breaking new ground.

— Paul Lee, Founder and CEO at Patlytics (AV portfolio company)

Companies leveraging cutting-edge technologies like AI are more likely to attract and retain top talent, as individuals are drawn to innovative and technologically advanced work environments. A HubSpot report indicates that two-thirds of the surveyed founders plan to recruit employees with AI expertise by 2025, underscoring the recognition among startup leaders that AI is essential for maintaining a competitive edge in today’s data-driven market. This trend suggests that more startups are investing in AI capabilities, fostering a new wave of innovative, agile, and customer-centric businesses ready to challenge traditional industries and open up new market opportunities.

For startups, adopting AI is more than just keeping up with trends. It’s about laying a solid foundation for sustainable growth, resilience, and continued relevance in a future where AI integration in business processes and customer interactions is expected to be pervasive.

Concluding Thought

This AI shift is transforming the startup ecosystem. Whether a startup adopts a few basic AI tools or fully integrates AI across its operations, AI is quickly becoming essential for businesses aiming for success. Being able to do more with less can help startups reach their milestones more quickly, easily, and efficiently, which might even allow startups to bypass venture capital funding and extend their bootstrapping phase.

This communication is from Alumni Ventures, a for-profit venture capital company that is not affiliated with or endorsed by any school. It is not personalized advice, and AV only provides advice to its client funds. This communication is neither an offer to sell, nor a solicitation of an offer to purchase, any security. Such offers are made only pursuant to the formal offering documents for the fund(s) concerned, and describe significant risks and other material information that should be carefully considered before investing. For additional information, please see here. Venture capital investing involves substantial risk, including risk of loss of all capital invested. This communication includes forward-looking statements, generally consisting of any statement pertaining to any issue other than historical fact, including without limitation predictions, financial projections, the anticipated results of the execution of any plan or strategy, the expectation or belief of the speaker, or other events or circumstances to exist in the future. Forward-looking statements are not representations of actual fact, depend on certain assumptions that may not be realized, and are not guaranteed to occur. Any forward-looking statements included in this communication speak only as of the date of the communication. AV and its affiliates disclaim any obligation to update, amend, or alter such forward-looking statements, whether due to subsequent events, new information, or otherwise.