Sign in Subscribe

Is AI coding end of the road for maverick software startups ?

In 2026, software is probably the only industry where a college grad could build a company eating noodles out of his basement. Other industries like biotech, manufacturing, semi conductors, renewables are capital intensive and cannot be bootstrapped from a college dorm. Airlines/space industry is an extreme example of this capital intensive nature where we have only two big companies in the world making commercial airplanes.

The advent of AI has made coding accessible to everyone. Analysts believe this will create thousands of software entrepreneurs. I sincerely hope so ! However, I would like to reason that it will strengthen existing monopolies and will make growing nascent software startups difficult. Let us understand why

Pre AI world

Two kids create an website that provides an innovative solution to write online documents. The products launches and they start getting users. Online users are loving this new product. It starts trending on reddit. A big competitive company in a similar domain notices. They do a quick calculation

What is the cost of  copying this software product?

It turned out that they needed to hire two / three more software engineers and atleast spent 6 months coding / testing it out. Would cost atleast 0.5 million.  So they instead decide to acquire the startup at 250K instead of building out the product.

Either the small startup grows into a big company after an year or is acquired by a bigger company early 

AI world

In the current scenario again the big company executives calculate

What is the cost of  copying this software product?

It turned out the Claude Code can copy/test all features in two days . Maybe a product manager verifies everything for a week. Total cost would be approx 5000 USD. They decide lets AI copy this baby!

Big company can AI copy the product of the smaller startup at a marginal cost. They get a larger revenue increase due to network effect of their existing larger user base

As we can see the costs of software building becomes marginal in the current AI ecosystem. Growing nascent software startups would be difficult without substantial capital invested to create large user base /  network effects early.

Comments ()