Startups burn their wings by relying too much on OpenAI technology: find out why!

ChatGPT's dominance is putting many startups in difficulty

A recent update to OpenAI's ChatGPT, which allows users to download PDFs and ask questions about them, has created a stir in the startup ecosystem. This development poses a significant, albeit predictable, threat to many companies, particularly "wraparound startups" that have built their business around a lack of functionality in ChatGPT.

The change reminds all founders and investors that no substitute can replace a sustainable business with a solid, independent product.

Wrapper products" provide a service by "wrapping" themselves around an API like ChatGPT, exploiting the underlying technology to offer a service that is not directly available via the API. The recent ChatGPT update exposes the vulnerability of these startups: in an instant, their unique selling proposition can be rendered obsolete by an update to the functionality of the underlying technology.

This is neither new nor very interesting. Startups build their success by extending the features and capabilities of big companies all the time, and some of them can raise money at multi-billion dollar valuations. The hope is that big company executives will notice what the startup is doing and buy it. This plan often fails explosively.

So what does OpenAI's decision mean for startups and their founders?