OpenAI co-founder says Cloud+AI is the future

FIRST PASS

Karpathy says Cloud+AI enables scrappy entrepreneurs to run multiple high-value companies leveraging AWS, GPT-4, and Stripe (X)

OpenAI co-founder Andrej Karpathy recently sparked a discussion on X about how Cloud+AI is revolutionizing entrepreneurship.

Commenting on a Lex Fridman interview with popular ‘indie’ entrepreneur Pieter Levels, Karpathy suggested that tools like AWS, GPT-4, and Stripe could enable scrappy individuals to build and run multiple successful companies that could reach billion-dollar valuations.

This trend could make company creation easier and more attractive compared with traditional employment. 

Merlin’s Notes: While we don’t think there will be many (if any) ‘billion-dollar, one-person’ companies, it’s worth paying attention to the broader theme here of how Cloud & AI can lower barriers to entry and allow nimble, AI-powered teams to quickly enter markets and capture market share from established players.

Legacy portcos may struggle to match the speed and efficiency of AI-enabled teams, potentially losing ground faster.

To mitigate these risks, funds should focus on strengthening portfolio companies' unique advantages, accelerating AI and cloud adoption, and exploring partnerships with AI tech players to enhance existing offerings and defend market positions.

Amazon’s GenAI tool, Q, saved it an estimated 4,500 developer-years of work (X)

Amazon CEO Andy Jassy recently shared on X how their GenAI assistant, Amazon Q, transformed their internal software development.

The tool dramatically reduced Java upgrade times from 50 developer-days to just hours, saving an estimated 4,500 developer-years of work (we also did a double-take when we read this).

Within six months, over 50% of Amazon's production Java systems were upgraded, with 79% of auto-generated code reviews shipped without changes.

Beyond time savings, the upgrades enhanced security and reduced infrastructure costs, providing an estimated $260M in annualized efficiency gains.

Merlin’s Notes: This is huge and has significant implications for especially tech-heavy fund strategies. AI-powered coding assistants have pulled in ~$1B in funding YoY, making a strong case for the ‘killer app’ title.

And it makes sense. Software engineers are expensive and many companies dream of a future where an AI agent could write and manage all the code they’d ever need.

While that future may never exist (and the jury is out on whether we’d even want such a future), we think PE would be wise to consider prioritizing investments in GenAI tools of their own that can have similarly outsized impacts.

JARGON BUSTER

USE CASE SPOTLIGHT

Building a proprietary investment engine for a top PE firm using public data

A leading PE firm partnered with Tribe AI to develop a Machine Learning (ML)-driven toolkit for gaining unique insights into a specific vertical using only publicly available data.

The goal? To enhance investment decisions and differentiate themselves in a competitive market.

In just six weeks, Tribe's team of specialists created an MVP that surpassed expectations. They developed a custom ML model that ingested hundreds of predictive factors from public data sources, including census data, social demographics, and infrastructure changes.

The result was a heat map of the US, color-coded at the county level, providing a visual guide for investment attractiveness.

The impact was immediate and significant:

1. Faster, more confident investment evaluations

2. Enhanced value proposition to potential portfolio companies

3. More favorable deal terms in some cases

As the PE firm's SVP of Data noted, "Especially in this market, if you're going to win, then you have to win on speed and price. And the only way you're going to get there is if you have the benefit of the conviction that a tool like this can give you."

The success of this project has led the PE firm to plan expansions into other verticals and incorporate more data sources.

It's a clear demonstration of how data science and AI can be the "last mile of innovation" in PE investing, providing a true competitive edge in sourcing, evaluating, and executing deals.

TOOL OF THE WEEK

Cursor

A tweet about building a financial dashboard in <5 mins using Cursor and voice went viral earlier this week and we can see why.

Cursor (built by Anysphere) is a code editor that bills itself as ‘the best way to code with AI’. The company initially raised $8M from OpenAI in 2023 and recently raised $60M from top VCs.

The video in the tweet is a pretty remarkable showcase and provides a glimpse into the future of software engineering.

While the tool is built for developers and those with at least some level of familiarity with coding, one can imagine how anyone with enough desire could use Cursor + Claude/ChatGPT to make something cool.