Noah Berger/Noah Berger
- AWS struggles to identify early stage AI startups led by solo founders or with unusual funding.
- Generative AI has sparked rapid growth of single-person startups with little or no outside funding.
- AWS plans to add a more data-based prediction model to its VC-driven approach to address this issue.
The generative AI boom has fueled the growth of single-person startups and companies operating without external funding.
For Amazon Web Services, these “solopreneurs” and bootstrapped startups have emerged as a “blind spot” in its customer discovery process, which heavily relies on connections with venture capital firms, according to an internal document obtained by Business Insider.
This has caused AWS to miss out on several high-growth startups as early customers, including SurgeAI and Base44. SurgeAI grew to $1 billion in revenue without outside funding, while Base44, once solely owned by its founder, was acquired by Wix for $80 million.
“This blind spot poses increasing risk to cloud market share,” Amazon employees warned in the internal document.
Amazon became the dominant cloud provider by working with early startups. Some of these nascent businesses grew into huge tech companies that spent heavily on compute, which drove demand for Amazon Web Services.
The rise of generative AI is messing with this successful formula. This new technology helps some startups get going with fewer employees. That means they sometimes need to raise less money. These smaller, often self-funded, businesses look from the outside like less interesting cloud customers, when in fact they may retain the ability to grow into substantial enterprises.
This is part of a broader challenge for AWS, which is seeing a “fundamental” shift in how AI startups spend on cloud computing, Business Insider previously reported.
An Amazon spokesperson said it’s “not true” that the company is missing early signals of fast-growth startups, adding that the company continues to “engage founders as early as we can, in collaboration with VCs, via programs like AWS GenAI Accelerator and AWS Activate.”
Being ‘out-hustled’
To tackle the issue, AWS intends to adjust its VC-driven discovery approach to add a more data-driven prediction model designed to spot promising startups at an earlier stage, according to the internal Amazon document obtained by Business Insider.
AWS can’t risk losing this market. A growing number of startups are run by a single employee, driven by AI’s efficiency gains. Replit’s CEO Amjad Masad previously said the era of solo software creation has arrived, saying anyone can build an app in a few hours with the right AI prompt. OpenAI CEO Sam Altman predicted last year that a “one-person billion-dollar company” would emerge because of AI.
David Levy, a former manager on AWS’ startup business development team, wrote in a blog post this week that AWS intentionally focused on founders early in their journeys to secure them as long-term customers. That approach accelerated AWS growth and led to roughly 70% adoption among startups backed by top-tier venture capital firms, he noted.
But that’s beginning to shift. Levy wrote that AI startups are now directing their initial spending toward GPUs, AI models, and inference tools, rather than traditional cloud compute or storage services, citing Business Insider’s earlier report. Those are areas where no single cloud provider holds dominance, creating fresh challenges for vendors such as AWS.
“AWS built an empire by chasing startups everyone else ignored,” Levy wrote. “Now they’re the ones being out-hustled by the next wave of builders.”
Have a tip? Contact this reporter via email at [email protected] or Signal, Telegram, or WhatsApp at 650-942-3061. Use a personal email address, a nonwork WiFi network, and a nonwork device; here’s our guide to sharing information securely.
Read the original article on Business Insider
The post Amazon sees ‘blind spot’ in identifying new AI startups as future cloud customers appeared first on Business Insider.
