The narrative that new features from major AI labs kill startups is often wrong. Instead, these releases serve as massive free education, validate new user behaviors, and unlock enterprise budgets. This creates demand for more specialized, vertical-focused tools, ultimately growing the entire ecosystem for startups.

Widespread anxiety from founders before OpenAI's Developer Day highlights a key challenge for AI startups. The fear is not a new competitor, but that the underlying platform (OpenAI) will launch a feature that completely absorbs their product's functionality, making their business obsolete overnight.

Higgsfield initially saw high adoption for viral, consumer-facing AI features but pivoted. They realized foundation model players like OpenAI will dominate and subsidize these markets. The defensible startup strategy is to ignore consumer virality and solve specific, monetizable B2B workflow problems instead.

Counter to fears that foundation models will obsolete all apps, AI startups can build defensible businesses by embedding AI into unique workflows, owning the customer relationship, and creating network effects. This mirrors how top App Store apps succeeded despite Apple's platform dominance.

The middle layer of the AI stack (software infrastructure for data movement or frameworks) is a difficult place to build a company. Foundation models are incentivized to add more capabilities from below, leaving little room for defensible platforms in between applications.

Despite the power of large foundation models from OpenAI and Anthropic, specialized AI companies like Cursor are succeeding. This suggests the AI market is a rapidly expanding pie, not a winner-take-all environment, where "transcendent" companies with superior product execution can capture significant value.

The founder of Stormy AI focuses on building a company that benefits from, rather than competes with, improving foundation models. He avoids over-optimizing for current model limitations, ensuring his business becomes stronger, not obsolete, with every new release like GPT-5. This strategy is key to building a durable AI company.

Unlike software bottlenecked by engineering headcount, AI models scale with capital. A frontier model company can raise more than its entire app ecosystem combined, then use that capital to launch competitive first-party apps and subsume third-party developers.

Startups like Cursor that are built on foundation models face existential platform risk. Their supplier (e.g., Anthropic) could limit access, degrade service, or copy their product, effectively killing their business, much like the scorpion stinging the frog mid-river.