The Shadow Network with KP Reddy

KP Reddy Unpacked: Is it AI or Bust?

February 06, 2024 KP Reddy
The Shadow Network with KP Reddy
KP Reddy Unpacked: Is it AI or Bust?
Show Notes Transcript Chapter Markers

Welcome to a fresh start in the tech world, where your AI strategy could spell the difference between a thriving startup and a spot in the digital archives. Today, KP takes you through the transformative journey AI represents for startups, particularly in sectors like architecture, engineering, construction, and commercial real estate. As venture capitalists sharpen their focus, we're here to tell you why an AI backbone isn't just advantageous—it's imperative. From revolutionizing development to streamlining operations, KP lays down the blueprint for a future where AI isn't just the navigator but the driver of your company's success.

This electrifying episode isn't just about keeping up; it's about leaping forward. We dissect the evolution of software business models and how AI tools are reshaping the very foundation of startup funding. At Shadow Ventures, we're living proof that lean operations paired with early tech adoption can punch above their weight, delivering efficiency that old-school capital-hefty models could only dream of.

Want more discussions like this? You can connect with KP Reddy and other innovators in the AEC and CRE Industry in the Shadow Partners Community....go to ⁠⁠⁠⁠⁠bit.ly/ShadowPartnersCommunity⁠⁠⁠⁠⁠ to learn more today!

Speaker 1:

You are listening to the Shadow Network with KP Ready, your gateway to innovation and architecture, engineering, construction and real estate, with a sprinkle of startups that are making a difference. In between, check us out on YouTube at Shadow Partners. Never miss a live stream fireside chat or talk that we got going on with the industry's most interesting innovators and leaders every single week. You can connect with KP Ready and other innovators in the AEC and CRE industry in the Shadow Partners community. Go to bitly slash shadow partners community to learn more. Today. All it takes is a few clicks for you to make a difference. Welcome to the future and welcome to the Shadow Network with KP Ready.

Speaker 2:

Welcome back. I am joined today by KP Ready. He's the CEO and founder of Shadow Partners and also Shadow Ventures. My name is Jeff Eccles. I am senior advisor and head of marketing at Shadow Partners and every week I get the opportunity to sit with KP Ready and ask him about his LinkedIn posts. If you're not following KP Ready so K-period, p-period, r-e-d-d-y on LinkedIn and my question for you is why not? If you're in the AEC or CRE space and you want to know what's coming in the future, if you want to know about innovation for the built environment, you need to be following KP. But I get the benefit every week of sitting with KP and saying KP, what were you thinking when you posted that on LinkedIn? This is what we call unpacking KP. So, kp, happy new year, welcome back. Let's talk about a new post, happy new year. All right, so you posted actually, as we're recording this, you just posted this yesterday. I think it's a really intriguing point, especially as we're getting ready to launch the next cohort of our incubator. I think this is really relevant in that context. But you wrote it's looking like if you are a SaaS company with no AI strategy, you may as well be pitching your novel client server technology to VCs. Okay, so, first of all, what does that mean and why does it matter?

Speaker 3:

Yeah, it's kind of funny. I post these things and entrepreneurs tend to be on the youngest side a little bit, so they're like what's client server, like I might as well write something about magnetic tapes and punch cards, but we're showing you're dating us right now. Yeah, the old guys. Right, we're like the muppets, the guys in there. So I think the reality is, if you're in tech, you have to not only understand the shifts but also constantly question your relevancy as a startup. And if you're a SaaS company, yeah we're cloud, we have a mobile app, etc. Etc. That kind of came to table stakes, right, that's like here's what. And now tell me what problem you're solving. And I think what's shifted in the venture community, especially you know specifically to venture is they're not going to fund. This is like an absolute right. Like you can prove me wrong, you can hit me up and argue with me. I love arguing, but I will put this in very absolute terms If you're not talking about your AI strategy to a venture capitalist, you're not going to get anywhere. Now, the flip side of that, vcs will say, well, every deck has every deck. We look at every pitch we have says AI. And I'm like, yeah, of course, because five years ago every deck you had, every pitch said something about cloud and SaaS. Like, of course, right, this isn't a bad, this is like the next evolution of software platforms. This is not a feature, this is like a new platform move right. So we move from mainframes to client server, to the cloud, to mobile, and now we're at AI, right. So I don't think. I think you have to shift your thinking. So if I was a startup right now, if I don't have an AI strategy, I would not actually pitch a VC. You're wasting your time, you're not going to get through the gatekeeper, yeah Right. So I think you can't ignore it. So I think there is a retrenching of existing startups that need to retrench and rethink and repitch. The second thing is like when you think about AI strategy, people are very focused on the customer experience and the customer feature set and how your platform is leveraging AI to deliver a different type of customer experience. That's like the obvious one, the back end of it, right. So think of it back of house. You can't ignore that AI is making software developers five, ten, a hundred X better and faster. So I think you also have to have answer the question of how is AI making you more productive and therefore more capital efficient? So if you said, call it, your startup two years ago was a SaaS startup, he said, oh, I need to hire 10 software engineers and I need X million dollars. You have to be able to address that. Actually, the way our CTO has deployed AI on the back of the house is making us so much more capital efficient that I only need two engineers or I'm going to reach these milestones in twice the time with the same 10 engineers. So I think you can't, you? There's this thing where people want to overlook the back of house productivity. You and I were talking about this the other day, just around video editing, and audio editing for $16 a month. We can run AI to do with some vendor. We talked to some consulting vendor wanted to charge us $5,000 a month. They're with people like that's incredulous. So if you think about it, you really have to address those two points when it comes to AI, especially to the venture community, and I think if you don't, you're a lead.

Speaker 2:

Yeah, I'm glad you brought up the back of house piece of that, because one of the things this is to me, this is a real danger zone in this whole discussion. Right, if you don't have an AI strategy, you may as well be be pitching a novel client server technology. But then what we see sometimes and I'm thinking the context of our incubator that we run and granted those, those are early stage or precede stage ideas, and even my students, which are even maybe arguably earlier stage in their journey. But what I see often in those two contexts is, oh, we've got AI, we've got this AI component, but it's one. Maybe it's not even a strategy, but it's. It's almost like, oh, we're going to, we're going to put this, this AI window dressing on, which may be client experience or customer experience, but it's certainly when they're when they're at that point, they have that, I would say, pretty shallow point of view. They're certainly not getting to that back of house that you're talking about the efficiency, the capital efficiency, etc.

Speaker 3:

Yeah, and I think that's where. So you know, when you're a founder and you think about raising money and you think about valuations, right, there's only two dials to valuation. One is revenue and then the multiplier Two X revenue, 20 X revenue, 100 X revenue. When you're pre revenue, this is zero, right? So you can have 100 X times zero and it's still zero, right? Yeah, let's, let's go back to algebra. So it's important that when you're communicating your strategy that you are, you do believe you can be capital efficient, and what I'll tell you is the deeper that strategy is vetted out and it starts to shift to here's the tactics and here's the process, the shift of who gets the value. Does the VC get the value or do you get the value is what goes on in play. So, if it's all strategy and five bullet points in a In a deck, and I ask you tough questions and it's clear that you just put five bullet points down, you haven't put any further thinking, then I'll take all the value, I'm taking all the risk, I will take all the value. Great, so you can build your app instead of a year ago, taking five million to build a product. But you're saying, because of a development tools. You can do it for a million. Well, I'll take that incremental change. Right, I'll take the delta, and that's my risk and I'll do that. But I get the benefit If you can actually demonstrate. Here's how we approach it, here's our processes, blah, blah, blah. Here's how we're going to be able to scale software development. Then you get to take the value, not the VC, and so who gets the value tends to align with who's taking the risk, and the more the founder de risks it is, the more the value they get to keep versus what I get to keep. Right, because I'm also taking the downside of the risk quotient. So I think it's super important. It's also so exciting what you can do now. Right, it's always tell people, if you had something like Shopify During the internet boom, you'd have been schlepping all kinds of stuff on the internet. Right, every small business, in fact the local bookstore, may have been able to compete with Amazon If they could have done it for ninety nine dollars a month with the Shopify account. Right, right, it couldn't because it took Hundreds of millions of dollars to build up these platforms. And I remember back in the day I was coding a shopping cart function from scratch and I had to figure out how to keep state like holding things in your shopping cart, how to do that across internet explorer and netscape and like browser stuff right, active back. So it was just like insane, right. Just thousands of man hours in Spotify, just I mean, that's what I'm Shopify. It's like ninety, nine dollars a month. You really almost have all the functionality right. So where I think it's getting interesting is the founders. When I look at a I and people say who do you think is at risk? And people want to talk about workers, and all that Part of me says venture capital is a risk Because now you don't need me. If you're using a tools to build your product, to launch your product, to market your product for sixteen dollars a month, you're launching your podcast, video, marketing, all that stuff using a I. You don't need to raise money, you don't need it. Why do I need it? I can start my startup for zero dollars, practically right, and so I think it's super interesting. I mean I think we're gonna look back on the cycle in this time and everybody's gonna feel like man, I should, I should have done this, I should have done that, and I think it's time for people to really take it seriously.

Speaker 2:

Yeah, that's a really interesting point. I'm sort of unpacking that myself in my head as you're talking about it and it's fodder for another episode. Certainly, but the future of VC in the face of AI, that, I think, becomes a really interesting discussion. I mean, obviously we're here talking about the future of your startup, the future of how you're, you know how and what you're pitching to the VC, but I think we also need to do an episode coming from the other point of view, because it's you're right. I mean, everything is being affected by this and this is really both sides of the table at this point.

Speaker 3:

No, and I think just a short history lesson right, when you look at client server and you were a founder which I was one of those founders you could build software, you and another person. You build software and you'd sell it to a customer for $250,000 or a million dollars. They paid you upfront and they paid you a 20% a year maintenance fee for that software. You didn't know if you knew how to code. You didn't need a VC when everything went to SaaS and you had to invest in building the platform and the market paid you in an annuity. So, in other words, I'm not paying you a million dollars upfront, I'm going to pay you $299 per month. You almost it almost pushed VC to have to support that model because we have to go build it and then sell it incrementally. The good news is they're very sticky because they're paying us every month and it's the frictionless and all that stuff. Right, markets are bigger but you had to have venture capital to build something that could scale. And then, of course, AWS kind of helped with. Oh well, you don't actually like AWS can charge you per month, right, if you build on their platform, kind of from a platform. So it's really interesting to see how this stuff evolves and I do think great founders are going to figure out how to use these AI development tools and not need venture capital. Yeah, I mean they'll want my check because I'm adorable, but they're not gonna need my check.

Speaker 2:

Well, well, there's, there's a. There's quite a value proposition there. The adorable KP, yeah. Yeah, we're gonna we're gonna have to do another episode and dig deeper into that, but I think for now you know this conversation about whether or not you Can actually survive, you know it get funded, etc. Without a solid AI strategy. I think is is a really good one, because it's the more we see and we're gonna. Just looking at the calendar, yeah, by the end of the week, we're going to be reviewing all of our applications for the next cohort of the incubator and I fully expect that every single one of those applications is going to include some sort of AI strategy.

Speaker 3:

So I think it. I think it's interesting, jeff, to point out you know Madelman, our CTO, who we've worked together for 15 years or something like that, right, he and I have always been early adopters because we need better hobbies, right? So we're always tinkering and so we've been using a lot of these tools as and he and he creates tools right, so it's not just using things off the shelf. I was talking to a large company CEO and they looked at all our activity like podcast, all the stuff that we do. Cal big is your team. I Was like three and and they were just blown away. It was unimaginable to them that if you count like you count, the investing come part of our business. There's five of us, that's it, folks. Five people are running a venture fund Doing all this content like now that, I mean, are we? Are we working five hours a day? No, we're working, but I think there's something. I think it's interesting as and then we're always kind of constantly challenging ourselves to Even do better there.

Speaker 2:

Yeah, yeah, absolutely. I mean, like you said, we were just reviewing software in the last couple of days and then we'll continue to do that, and it's Always searching for the new tools and strategies and we're not out looking for for funding. I mean, we're on the other side of that table. Yeah, this has been really interesting. If, again, if you're not following KP ready on LinkedIn, if you're anywhere in the startup space the especially the AEC, architecture, engineering, construction or commercial real estate world Focused on innovation for the built environment you need to follow KP, because these are the kinds of conversations that are going on on his LinkedIn profile. So, k period, p period ready, which is already DDY on LinkedIn, follow him and Keep following us here. Subscribe here wherever you're listening to this podcast or watching the video of this, and I'll keep showing up because I love asking KP the question what were you thinking when you posted that on LinkedIn? So again, this post reads it's looking like if you were a SaaS company with no AI strategy, you may as well be pitching your novel client server technology to VCs. If you're a little younger than KP or I, you may need to Google Some things there, but it'll be worth your while and I'm glad you listened along to listen to KP unpacking this post. So, kp, thanks again for doing this with me. Thanks, jeff, absolutely.

Speaker 3:

And thank you for listening.

Speaker 2:

We'll be back again next week with another Unpacking KP.

Speaker 1:

Thanks everybody, thank you for tuning in to another episode on the shadow network, here with KP ready as always. Remember you can connect with KP and other innovators in the AEC and CRE industry in the shadow partners community. Go to bitly slash Shadow partners community to find out more today until next time.

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