Podbit · The a16z Show
AI companies launching browsers may come to regret it. Chrome has 5 billion users, and Google — restrained by antitrust litigation — has been deliberately letting competitors run first. Baker's warning: Google can do this better, and they've been watching and waiting.
Where this was said
At 19:45 · chapter starts 14:50
In early 2024, Baker publicly predicted all application SaaS might be worth zero. He's moderating that view — some application SaaS companies, especially those serving fragmented SMB markets, could be big winners. But the competitive threat remains acute and the window is narrowing. He draws an analogy to retailers who saw Amazon's thin margins and decided they didn't want to compete — a mistake that took 25 years to fully reveal itself. For SaaS companies today, the equivalent mistake is protecting existing gross margin structures to preserve stock prices [2] — Gavin Baker "It is definitionally impossible, given what we just discussed, to succeed in AI without gross margin pressure. And I do not know why they h…" 15:35 . Baker is direct: it's definitionally impossible to succeed in AI without gross margin pressure, and Microsoft and Adobe both prove that a software company can navigate a margin-compressing transition and still produce a decade of strong returns. The most urgent example is Cursor, which has accumulated 1 trillion coding tokens — a data flywheel that incumbent public coding companies have inexplicably failed to challenge [1] — Gavin Baker "Baker once predicted all application SaaS could go to zero. He's walked that back, but the urgency remains: Cursor has accumulated 1 trilli…" 14:43 . The window to compete, he warns, is closing.
AI coding tool Cursor has accumulated 1 trillion coding tokens, creating a data moat that makes it increasingly difficult for incumbent software companies to catch up.
With AI coding tools like Cursor, Bhanu replicates an existing free tool for a new keyword in under 5 minutes. What used to be a multi-day build is now a lunch-break task.
Ahrefs, SiteGPT, Cal.com, PostHog, Datafast, Sibyl AI, Bento, Feather, Featurepace, Mintlify, Cloud Code, ChartMogul — Bhanu runs his entire business solo with these 12 tools.
PropGPT runs on React Native with TypeScript and Python for ML, Neon for the database, RevenueCat and Superwall for monetization. LLM costs are $20/month, data APIs $100/month, and after $10K in monthly marketing spend, margins sit at roughly 50%.
Game apps keep users engaged long enough for ads to pay off. Tool apps don't — so if you're building a utility, ads are almost always the wrong call and subscriptions are your only real lever.
Inside SEO Bot, a single button labelled 'Boost My Domain Rating' routes users directly to Listing Bot. That one interaction converts a user of one tool into a user of two — without any marketing cost.
Directory listings are a powerful but underrated growth channel — but only if your product is genuinely interesting enough to earn the click. AI products have a natural advantage here because they're easy to package in a compelling, clickable way.
The fastest path to Twitter growth isn't volume — it's forming sharp opinions about how the platform works and sharing them immediately. People cluster around those who understand the rules and say so out loud.
Sam had no coding knowledge, so he used ChatGPT voice mode to generate his entire codebase and copy-pasted it into Notepad. A friend later introduced him to Cursor, and he never looked back.
Copy days of Discord chat history, paste it into ChatGPT, and ask it to list recurring pain points. The ones that come up most often are your best product bets.
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