AI Is Forcing Startups To Chase a Mirage

AI is just the latest shiny object of mass distraction

If you’ve ever wondered why a new company with a ton of potential would suddenly start making moves that seem awkward and desperate, there’s usually a good reason.

Actually there are four good reasons. But they all boil down to one root cause, and that root cause can change as trends come and go.

I’ve spent 25 years founding, working at, and advising startups. I’ve seen company priorities go off the rails more times than you might imagine.

Another sad story dropped into my inbox last week, and this time the antagonist of the story was AI.

The Sad Story

The founding CEO of a “Generative AI” company wrote in to me via my website. Long story short:

• They launched their non-AI product to some very promising sales numbers.
• Then they rode a series of AI-fueled catalysts to even more success.
• But ultimately, they came crashing down after just a couple years, looking nothing like the company that the founder initially set out to build.

Reading through the founder’s story, I felt an uneasy sense of deja vu. Because it’s the same old story I’ve seen over and over again, only with a different villain this time.

Here are the top four ways that I’ve seen a change in a startup’s priorities lead to some unpleasant changes in direction, with a real world example of how a changes to accommodate a bandwagon trend can destroy that company from the inside.

Chasing the Wrong Kind of Attention

One of the more unconventional lessons to learn at a startup is that attention that doesn’t directly lead to revenue is usually more trouble than it’s worth.

The founder who wrote to me had founded his company a little over two years ago, offering a “mental health companion app.” The company had achieved some initial success, both clinical and financial, and were slowly but surely on their way to establishing a foothold in what had become a hotly competitive market.