From The Economist, August 11:
The technology is allowing entrepreneurs to start and grow businesses on their own
A hand with robots attached to its fingers.
Sarah Gwilliam is neither a software engineer nor—by her own admission—someone who “speaks AI”. But after her father died recently she got the spark of an idea for creating a generative artificial-intelligence startup that would help others like her handle their grief and sort out their late loved ones’ affairs. Call it wedding planning for funerals.Her firm, Solace, is still more of an early-stage startup than an established business. But apart from herself, almost no human being is helping her build it. She has joined an AI-powered incubator, called Audos, which decided that her idea was promising. Its bots helped to set her up online and on Instagram. If her idea works out, the incubator will not only provide capital; its AI agents will support Ms Gwilliam with product development, sales, marketing and back-office work, all in exchange for a royalty. She does not need staff. In effect, AI helped her co-found the company. “I can’t tell you how empowering it was,” she says.
As is its custom, Silicon Valley has already coined a neologism that describes single founders like Ms Gwilliam: they are “solopreneurs”. In tech circles, there are bets on which of them is likely to create the first single-person unicorn—an unlisted firm worth more than $1bn. Some hope that generative AI will make starting a business so cheap and hassle-free that anyone will be able to become an entrepreneur much as anyone can become a YouTuber—a breath of fresh air in America’s concentrated business landscape. Whether people like Ms Gwilliam will be able to escape the suffocating grip of the tech giants, however, is another matter.
Technological revolutions have a habit of shaking up the way firms do business. The increased importance of machinery combined with the expansion of transport networks in the late 19th century led to the rise of giant corporations. Ronald Coase, a British economist, argued in his 1937 paper “The Nature of the Firm” that their existence was a testament to the efficiency of consolidating and managing work within the confines of a business, rather than outsourcing activities to the market. That, however, began to change thanks to digital communication. Not only could companies more easily outsource manufacturing and back-office jobs to low-cost countries. They could also rely on internet platforms like Google for marketing and Amazon Web Services for computing.
The rise of AI could well accelerate the trend, as semi-autonomous agents provided by Silicon Valley enable firms to perform the same amount of work with fewer employees. Henrik Werdelin, who co-founded Audos, says that the rise of cloud computing helped him start several new businesses over the past 20 years or so with little more than the swipe of a credit card to get going. He describes AI as the next wave in that “democratisation”. “You don’t need to code, you don’t need to be able to use Photoshop, because you can get AI to help with that.” This, he hopes, will give rise to a flood of startups built by people like Ms Gwilliam with no background in technology but who have identified real problems to solve.
Another evangelist is Karim Lakhani of Harvard Business School. It now offers a leadership course for executives in which they use generative AI to build a snack-food company in 90 minutes, using the technology to perform customer research, generate recipes, find suppliers and design packaging. In a recent paper, Mr Lakhani and his co-authors presented a field trial in which 776 professionals at Procter & Gamble, a consumer-goods company, were asked to address a real business need either individually or in two-person teams, with and without using generative-AI tools. It found that AI significantly boosted performance, helping individuals with AI match the performance of teams without it. AI proved to be more of a “teammate” than a tool.
With the era of free money over, entrepreneurs are eager to find ways to keep costs down. Peter Walker of Carta, which helps startups manage equity ownership, says that founders used to boast about how many employees they had. “Now it’s a badge of honour to say, ‘look how few people work for me’.” According to Carta’s data, the typical period it takes founders to hire their first employee after their startup incorporates has risen from less than six months in 2022 to more than nine months in 2024 (see chart). Base44, an AI coding startup, was recently sold to Wix, a web-development platform, for $80m. It had just eight employees.
It is early days, of course. For one thing, AI agents are far from foolproof. In June Anthropic, an AI lab, revealed the results of an experiment in which its Claude Sonnet model operated a vending machine at the firm’s headquarters. The bot’s goal was to avoid bankruptcy. It was good at identifying suppliers and adapting to user requests (including hunting for a tungsten cube mischievously requested by one employee). But it ignored lucrative opportunities, hallucinated, offered too many discounts and ultimately failed to make money....
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