· Quick Take · 2 min read
Winning in the LLM Application Market: A Founder's Strategy
Success in LLM applications comes from niche focus, speed to market, and cost optimization, not big funding or features.
The LLM application market is growing big and has a lot of room for new ideas and startups. Some notable ones like Cursor and Perplexity, and many simple SaaS such as that help you turn docs into presentation slides. In this market, your edge usually comes from a tight niche, speed, tiny product wins, and cost control, not big funding or big features.
The upside seems clear, but there are two common downsides I see: the entry barrier is usually low, and ideas or even some trade secrets are often easy to copy.
How can a founder win in this market? One way is to start in a niche, go first, and go fast. The main target is to gain a loyal group of customers and a strong brand in your niche early. You often have roughly 3 to 6 months to build this before attracting competitors. Try to deepen the relationship with your customers through channels like email or social.
As features are so easy to copy, it is hard to keep a durable moat at scale. Often the separator is tiny things here and there that make users happy without even noticing. So in those 3 to 6 months, understand your customers, what they need, and polish the app experience as much as possible.
You should optimize your API costs all the time. Because of the two downsides above, someone may see it as lucrative and it may not take long for them to get a similar product. Then you may need to lower your price. At that time, even small savings in AI bill, which is often the biggest cost, can give you room to float.
Does external funding help? Often no. LLM applications usually do not need a big team, some even run solo. So you mainly spend on marketing and API costs. Yous should not run long with revenue below your AI bill. That is not sustainable unless you are chasing hypergrowth and have clear funding to cover it. Marketing can help gain users, but keep it moderate. Retaining users is hard, so you may waste a lot of money in an ad bidding war to get customers who might switch the very next day.
