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The AI-Native Startup: A VC’s Perspective

Published on 3/3/2025

Ravi Metta

Ravi Metta

The AI-Native Startup: A VC’s Perspective

Why AI is Not Just a Feature—It’s the Future of Every Company

Introduction: AI is Eating the World

Marc Andreessen famously said, “Software is eating the world.” In 2024, we firmly believe AI is now eating software. This shift is not about adding AI features to existing products—it’s about fundamentally rethinking how businesses are built, scaled, and monetized. AI is not just a tool; it is an entirely new paradigm that is reshaping industries, from healthcare and finance to logistics and education. Companies that fail to adopt an AI-first mindset risk becoming obsolete as AI-driven businesses establish cost, speed, and efficiency advantages that traditional enterprises simply cannot match.

The AI-Native Startup Defined

An AI-native startup is not just using AI; it is built around AI at its core. This means:

  • The business model depends on AI-driven efficiencies (not human labor). AI automates repetitive and manual processes, enabling businesses to scale without proportional increases in workforce size.
  • The product gets better with every interaction through continuous machine learning. Unlike static software products, AI-native applications continuously improve based on user behavior, market trends, and real-time data.
  • The company has defensibility via proprietary data, model fine-tuning, or automation that competitors can’t easily replicate. Successful AI-native startups leverage unique datasets that create learning advantages, making it harder for competitors to catch up.
  • AI is central to customer experience and product differentiation. The most valuable AI-native companies will create experiences that feel nearly magical to end users—think hyper-personalized recommendations, real-time automation, and AI-powered co-pilots that enhance human productivity.

Why AI-Native Startups Will Win

  • Cost Reduction & Automation – AI-driven startups can scale with fewer employees and higher margins than their traditional counterparts. For example, Jasper AI, an AI-native content generation platform, enables businesses to create high-quality marketing content at a fraction of the cost of human teams.
  • Data Moats – The most successful AI startups are not just building models; they are owning unique data sources that make their products smarter over time. OpenAI’s partnership with Microsoft has created a powerful flywheel where user interactions continually enhance AI performance.
  • Personalization & Hyper-Automation – AI enables hyper-personalized customer experiences, making it easier to create sticky, high-retention products. Companies like Netflix and Spotify have leveraged AI to fine-tune recommendations that keep users engaged, demonstrating the power of personalization.
  • Domain-Specific AI – The next frontier for AI-native startups is creating verticalized AI solutions tailored for industries such as legal, healthcare, and finance. Companies like Tempus (AI-powered precision medicine) and Ironclad (AI-driven contract lifecycle management) are proving that AI can drive transformation in specialized domains.

Investment Insights from BAT VC

  • AI is not a trend—it’s a platform shift. Much like mobile and cloud, AI will redefine every industry over the next decade. We believe AI-native startups will have an unfair advantage in market expansion, automation, and customer engagement.
  • AI-native startups need a defensibility strategy. A GPT-4 wrapper isn’t a business model—founders need proprietary data, distribution, or deep domain expertise to build long-term value. The startups that win will not just call APIs but create proprietary layers of value on top of foundational models.
  • Product-market fit for AI looks different. Traditional CAC-LTV models are evolving as AI-first companies develop new pricing models based on automation, not human labor. AI-native businesses will need to rethink their go-to-market strategies, as some categories will naturally be dominated by free or low-cost offerings.
  • The AI cost curve is shifting. As AI compute costs decline and models become more efficient, companies that structure their business models for long-term sustainability will gain an edge. Investors and founders alike must understand that while AI is currently compute-intensive, the economics will change rapidly over time.

Conclusion: Investing in the AI-First Future

At BAT VC, we prioritize AI-native companies that aren’t just integrating AI into their stack—but are fundamentally rethinking what’s possible in the AI economy. The winners will not be those who simply leverage AI; they will be the ones who can’t exist without it. We are excited to back visionary founders who see AI not as a feature but as the foundation of their businesses, and who are ready to redefine the industries they operate in.

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