By Steven Rosenbush

Most companies necessarily approach generative AI as an innovation to integrate, but a handful of startups have sprung up with artificial intelligence as their starting point.

Like the digital-native companies that disrupted their elders at the dawn of the internet era, these AI natives don't need to reimagine their products, infrastructure or workflow, much less retrain or cut employees as a result of the new tech. They are testing boundaries in sectors from finance to software development and advertising and marketing. And in some cases they are overturning ideas about what's possible, especially when it comes to growth.

It isn't clear how many will succeed. But established companies should keep them on their radar, as a potential source of new competition, fresh ideas to be adopted and mistakes to be avoided.

" Microsoft, or some other company that's a going concern today, has a way of doing things, and they are like, 'Can I do this more efficiently?' " Jared Spataro, chief marketing officer of Microsoft's AI at Work group, told me. "But we are starting to see the upswing, the creation, of AI native companies. These are companies who say 'I don't care how it was.' "

Spataro, who leads nearly 300 employees under the Modern Work and Business Applications umbrella, said that AI-native companies provide a glimpse into the future of work. All companies should learn from them as they move toward becoming what Spataro calls "AI first."

AI native companies have a wide range of characteristics, but they all tend to see AI as more than a tool to increase productivity or drive a particular return on investment. It is a way for them to replace structured processes, which have been at the heart of the corporation throughout the industrial era, with fast, powerful, artificial intelligence and reasoning.

Cancel the 'fire drill'

Advertising veterans John Elder and Michael Barrett sold their agency, Heat, to Deloitte in 2016, and left in 2021 to create something of their own. Deloitte has a sponsorship agreement with Dow Jones, the publisher of The Wall Street Journal.

That year, Elder and Barrett developed Supernatural AI, a holding company that includes their new agency Supergood. The company said it plans to make Supercharger, its AI-based software-as-a-service platform, widely available for marketers and agencies to license this spring.

The big problem they see in advertising is that prices are falling and compensation costs are rising. "The only answer is technology," said Barrett, the chief strategy officer. While technology has been applied aggressively in many parts of the ad industry, it has lagged in branding, where Supernatural focuses.

Supernatural's Supercharger platform brings together multiple data sources, proprietary prompts, and AI models that help the firm with tasks including understanding the competitive landscape, defining and communicating with audiences to uncover insights, building marketing strategies and developing campaign assets for its clients, according to Barrett. The goal is to strip away processes and bring in artificial intelligence and reasoning, delivering outcomes faster and better, he said.

Elder, Supernatural's CEO, says the company has twice the revenue and half as many people as Heat did at a comparable stage of development.

The way this works in practice was apparent recently when Supergood received a request for proposal from a large prospective client in need of a branding campaign. Supergood had one weekend to formulate its plan.

"Normally that would be a fire drill, right? You would have had a whole process that you were going to execute," Barrett said. "I would have had to pull two people out of this, and two people out of that and assemble a team and slam something together."

Instead he spent a Sunday morning feeding relevant documents and information into reasoning models available on the Supercharger platform, then working with the models to quickly pull a proposal together.

Supergood, which came out of stealth last February, has worked with a number of clients including U.S. Bank Chief Marketing Officer Michael Lacorazza. "It accelerated the development process so instead of being in market [with a brand campaign] in six months we were in market in three and a half months," Lacorazza said on The CMO Podcast in December. "We made human decisions at the end of day for the work. We're accountable for it," he said.

Compounding advantage

AI native companies tend to build deeper competitive moats, according to Guru Chahal, a partner at Lightspeed Venture Partners. "Where I sit, the most important thing is, are you the kind of founding team that can build compounding advantage into your platform? The more it's used the better it gets, the harder it gets for a competitor to rip it up," he said.

That's because traditional SaaS software is quite rigid, even after AI is added onto it, while AI-native apps are more malleable. They have a capacity to dynamically change and learn from customer data and workflows, becoming as good as a custom app that a client might have commissioned, according to Chahal. It's like a streaming-music playlist that constantly adapts to the user's tastes: The longer one uses it, the harder it gets to move to another service.

And for the AI-native provider, the experience it accumulates quickly becomes valuable not just to that client, but across its entire industry, Chahal said.

As a result, some AI native companies are gaining scale with remarkable velocity.

StackBlitz hit $20 million in annual recurring revenue eight weeks after it released Bolt.new, a text-to-app product targeting marketing, product and development teams, according to Saam Motamedi, a partner at venture-capital firm Greylock, which invested in StackBlitz.

"Traditionally if we wanted to launch a product, and we could do like a million this year, five million next year and $20 million the next year -- so let's say three years -- we would be viewed as a best-in-class company," Motamedi said. "I'm picking an extreme example. I don't think that there are many companies that went to $20 million in eight weeks. But these examples now exist."

Write to Steven Rosenbush at steven.rosenbush@wsj.com

(END) Dow Jones Newswires

February 07, 2025 05:00 ET (10:00 GMT)

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