Table Of Content
- The Emperor Has No Moat
- 1. The “Sherlocking” Threat: Your Product is Just Sam Altman’s Next Feature
- 2. The “Token Tax” Kills Margins
- 3. The Incumbents Will Eat You (Without Buying You)
- 4. The “Service Shop” Masquerading as a Product
- 5. Who Will Actually Survive? (The 5%)
- Conclusion: Build a Moat, Not a Wrapper
- Webverbal Pulse Action Point
The Emperor Has No Moat
It is 2025. Every pitch deck sent to a VC in Bengaluru or Mumbai has the letters “AI” on the cover slide. From “AI for Chai” to “AI for Matchmaking,” the hysteria is deafening. Founders are raising valuations that defy gravity, claiming they have built the next big thing.
But let’s look at the code. Strip away the fancy UI and the marketing jargon, and what do you find? A call to the OpenAI API
Here is the contrarian truth that no accelerator wants to tell you: Most of these “AI Startups” are not technology companies. They are thin wrappers around someone else’s brain. And when the brain (OpenAI, Google, Anthropic) gets slightly smarter, these wrappers will be suffocated instantly.
In this Webverbal Pulse reality check, we analyze why the “AI Gold Rush” is about to turn into a graveyard for 95% of founders who mistook a feature for a company.
1. The “Sherlocking” Threat: Your Product is Just Sam Altman’s Next Feature
Remember “PDF Chat” startups? They were hot for 3 months. Then OpenAI released an update allowing you to upload PDFs directly to ChatGPT. Poof. Hundreds of startups died overnight.
The Contrarian Reality: If your startup’s entire value proposition is “I make GPT easier to use for [Specific Niche],” you are living on borrowed time. You are renting your existence from a giant who doesn’t care about you.
- The Rule: If a single update from OpenAI or Google can kill your business, you don’t have a business; you have a feature request.
2. The “Token Tax” Kills Margins
In the SaaS era (2010-2023), margins were beautiful (80-90%). You wrote the code once, and sold it a million times. The cost of serving the next customer was near zero. In the AI era, every interaction costs money.
The Unit Economics Trap: Every time a user asks your “AI Bot” a question, you pay a “Token Tax” to the model provider.
- If you scale to 1 million users, your API bill scales to the moon.
- You cannot rely on “economies of scale” because you don’t own the factory (the model).
The Outcome: Many Indian AI startups are burning cash not on acquiring customers, but just on servicing them. They are subsidized by VC money. When the funding winter freezes again, these low-margin wrappers will be the first to freeze to death.
3. The Incumbents Will Eat You (Without Buying You)
The common dream of an AI founder: “I will build this cool AI tool, and then Salesforce or Zoho will buy me for ₹100 Crores.”
The Harsh Truth: Why would they buy you? They have more engineers, more data, and more distribution than you.
- Microsoft didn’t buy an “AI Writing Tool” startup; they just built Copilot into Word.
- Adobe didn’t buy an “AI Image Generator”; they just built Firefly into Photoshop.
The “Distribution” Wall: In AI, the winner is not the one with the best algorithm (because everyone uses the same models). The winner is the one with the best distribution. And guess who has distribution? The incumbents.
4. The “Service Shop” Masquerading as a Product
In India, we have a unique problem. Many “AI Product Companies” are actually just Service Agencies in disguise. They claim to have “Proprietary AI,” but behind the scenes, it’s just 50 engineers manually tweaking prompts or cleaning data.
The “Fake AI” Bubble: Investors are starting to do technical due diligence. They are asking: “Show me your model weights. Show me your training data.” When the answer is “Oh, we fine-tuned Llama-3 slightly,” the valuation drops from $10 Million to zero.
- The Lesson: You can fool the media with a “Tech-Enabled” tag, but you cannot fool the P&L statement forever.
5. Who Will Actually Survive? (The 5%)
So, is it all doom and gloom? No. There will be massive AI winners from India. But they won’t look like the “Wrapper” crowd.
The Survivors will be:
- Vertical AI: Startups that own proprietary data that OpenAI cannot access. (e.g., An AI trained on 50 years of Indian High Court judgments, or clinical data from rural Indian hospitals). Data is the new moat.
- Edge AI: Startups running models on the device (phones/laptops) to save cost and privacy.
- Hardware/Infrastructure: The people building the chips, the data centers, and the cooling systems for the AI age.
Conclusion: Build a Moat, Not a Wrapper
The “AI Summer” is ending. The “AI Autumn” is here. The leaves (wrappers) are falling. only the roots (deep tech) will remain.
To the Indian founder reading this: Don’t build “AI for X.” Build “X that uses AI to be 10x better.” Focus on the problem, not the prompt.
If you remove “AI” from your pitch deck, do you still have a compelling business? If the answer is No, you are already dead; you just haven’t run out of cash yet.
Webverbal Pulse Action Point
The “Wrapper Test” for Founders: Ask yourself: “If OpenAI releases a free version of my product tomorrow, do I survive?”
- No: Pivot immediately. Get proprietary data.
- Yes: Congratulations, you have a real business.
