David vs. Goliath, but make it venture-backed

0:05This week on Great Chat, we talk about the AI wars and the benefits of being a challenger brand versus the de facto market leader. I'm Angela, and today I'm joined by Helen and Ashley. As always, Great Chat is brought to you by Mercury, the fintech used by entrepreneurs through every stage of company building. We use Mercury to run this podcast and love recommending it to other founders and fund managers. Try it for yourself. Visit mercury.com to join over 200 ,000 entrepreneurs who use Mercury to make managing their money unbelievably simple.

0:39Hi, guys. Hi. Welcome back, Angela, to both the pod and the world. I've been living in a cave, like blocked by a gigantic rock. I have no idea what's been happening in the outside world. So I feel like I'm just... Learn about that later on. I love when Angela disappears. I'm like, big things are cooking. It's not a little pre-seed deal. Something's happening. So we were trying to give her a rundown on what she missed in the world. And I feel like The big headline is Costco is selling GLP-1s at 50 % off. Apparently, they've got some partnership with two of the drug companies. So yeah, it's Ozempic and Wegovi, I think, now like 50 % off.

1:26Maybe GLP-1s are Costco's new rotisserie chicken. Like, they're willing to sell it at a loss just to keep the people... But then there are all those investigative deep dives on how the rotisserie chicken is like not a good thing to buy there. No, wait, sorry. You're blowing my mind. Like, wait, I like candy. Wait, hold too many. Okay. First of all, this is like life changing because I was in Europe and GLP ones are much cheaper in Europe. So I was literally trying to set up like a human trafficking operation for myself to purchase like three months worth of GLP ones in London to take back with me.

2:01But now I can go to Costco and not human traffic GLP ones. That's exciting. Angela, it's like a perfect pair with eggs because you need to eat a lot of protein if you're taking GLP-1s. And so you can get like the discount GLP-1s and like the dozen crates of eggs that your family buys monthly. I want to see that like Costco shopping cart, you know, because they have like a very particular look to them of somebody that's just like all eggs on one side and then just like the stack of pens. Stacks of GLP-1s. It should be Serena pushing the cart. That could be their name. So true. Oh, yeah. Muscles.

2:39Like, muscle deterioration is, like, a number one sort of, like, side effect, right? Or something. Yeah. Although I think they're working on, like, future versions that help mitigate that. So stay tuned. Our neighborhood Costco is not going to know what hit them because we are going to up our consumption of eggs. And they will literally just buy out the entire supply of Costco eggs. but wait Helen like backtrack like rotisserie chickens from Costco like what like this is like a staple of our household like don't crush my dream yeah investigative I'm recording on great chat talking about it just yeah yeah it's something to do with like the chickens not being yeah chickens not being like humanely whatever oh I thought it was so there's this amazing book on like grocery stores and like how to shop them well it tells you like what not to buy I'll try to find the name of the book and share it in the group chat.

3:37But like there's a whole sort of sequencing of like what to do with food when it doesn't sell, right? So you have like the chickens for sale just like, you know, ready to go. So you can take them home and cook them. If they can't sell you the chicken, they like put it in the rotisserie. And so like the rotisserie chickens have already been like hanging out for a while. and then even worse is never buy the chicken salad because the chicken salad is what they do if no one buys the rotisserie chicken well it's their derivatives right it's like yeah but it's like you're eating a chicken from like the 1900s by the time you're in a salad and so um and so and i used to like my like i don't like a lot of prepared foods but like if i have to eat prepared foods like i like like curry chicken salad and now i'm like no no more i know too much Anyways, I knew that my aversion to mayonnaise and mayonnaise products would save me one day.

4:32And this is kind of how I avoid the chicken salad. This is the hard hitting news that like we need, which is GLP ones on discount and beware of the rotisserie chicken. Like this, it could save your life. Both. So the other thing, did you guys make any fun videos on Sora last week? I tried to make two and both of them were like not allowed. I didn't want to do anything with my own face likeness cameo, but I came up with some clever endings to movies that I thought would be funny and both of them violated whatever sort of like copyright guardrails they have. But did you do it on the first day or like a couple days later?

5:13No, as soon as Sally was my hookup for the invite. This was before they like came down harder. So I hit their most meager level of guardrails, and now they have much higher ones. But I will say my husband's super into it, which is funny, and a lot of my friends are into it. I just like, guys, I am immune to whatever gets people excited about seeing their own face in cartoons and videos. It just does nothing for me. But I have lots of thoughts on the launch. But first, Helen, I want to hear. Oh, that's so interesting. You know, it's like, what was that, um, uh, dating myself, but you know, do you remember the holiday card where you and your four coworkers become like the elf and you like send it to other people?

6:01Elf yourself. Elf yourself. Oh my gosh. Wow. In a different world. Okay. Well, anyways, yes, actually I had that. I'm going to send the link. Um, but I had that thought when I was doing it, uh, felt very like elf yourself, which is a very like 2005. Go elf yourself. 2005 thing. So that's a good callback. But the first video I made did not have copyright violations because I was like, oh, I can do, I can put myself in any situation. And I made myself a Olympic gold medalist in the 92 winter Olympic games. It was amazing. Congratulations. Yeah. Thank you. Now you don't have to actually learn to skate.

6:42No, I was a figure skater for like 10 years. So this was a very... I actually did not know that. I grew up in Buffalo. Not a lot to do. I knew about your like dancing background. Yeah. But that makes sense. It's in the family. Exactly. But no, that video lives on. And so that was what I created. Angela, did you create anything? No, I mean, this is like somewhat embarrassing to say, but so many people were emailing me for Sora invites. And I was like, I don't even know how I get myself a Sora in my, so. Yes, Sally. Sally's patient zero in our group chat. So hit her up. So, okay. So the thing I liked the most about the Sora launch or Sora 2 as it is was Sam Altman's decision to make his cameos, his likeness, like available to all.

7:33I thought that was absolutely brilliant because it instantly normalized the behavior. Like he's like he's he's modeling the behavior, you know, he wants people to have on the platform. It also meant that the first time we saw, you know, like a public figure doing something really goofy or even offensive, it was Sam Altman. And so it just sort of like normalized and like defanged like, oh, like here's Sam Altman like doing a crazy dance or saying a crazy thing. And it was so smart. It was like also it just meant he was everywhere and that Sora 2 videos were instantly recognizable versus like meta vibes.

8:15Totally. That reminds me of a topic you like, which is it made me think of how Zuck always blurs out his kids' faces when he shares photos of his family. Right? What a contrast. I mean, one is kids. But the broader point is, right, he is modeling behavior, right, in a way that is quite contrary to the way that I think that he would want users to use the product, which is different than what you're saying. what you're saying Sam's doing. So yeah, I thought of that as well. I also thought about it. Actually, I think it was, I tweeted about this and then someone, I wish I could give him credit, but I don't remember who it was off the top of my head replied and, and also said like what an interesting contrast with Zuck.

9:00Cause right now Zuck's trying to be cool. He's got his like gold chain. He's like, he's very, he's very like packaged right now in this like sort of new Zuck mode and here is Sam just leaning into like awkwardness and hilarity and like being memed and and what an interesting contrast between like trying to have a lot of control over your public image and just being like hey guys do whatever the fuck you want with me so I thought that was I thought that was really fun um and uh and like uh you know there's sort of a little bit of a feels like suck and Sam rivalry brewing and so fun to see the lanes they're both picking even just for their their like you know personas.

9:46Totally so yesterday was um dev day right third third annual dev day but definitely the one that got I think the most coverage um to date and there was a lot of chatter about the announcements and you know I think we anticipated that they were going to do something make a big announcement on agents it does sound like there's you know, ChatGPT becoming the everything app is quite a possibility. But what I thought was really interesting were all the tweets that were like commenting on the authenticity of, you know, sort of Sam and Greg and Yanni Ive like on stage and how this felt so different than like, you know, they compared it to like a really polished pre-recorded Apple keynote.

10:28And I think there was one tweet and it was like, I'd rather see, you know, like a hundred Zuck fumbles than, you know, like a perfectly polished, pre-recorded Apple keynote. I think they're referencing like the meta, meta glasses that launched and there was like a little glitch, but it felt so real and authentic. And like, you know, I was on Instagram and I saw Daniel Lurie, the San Francisco mayor, you know, doing like a, an interview with Sam and Greg outside. And it was just so like, he just handed someone a phone, you know, his phone to have them film them. And it was like, I just cannot imagine any time in the past, like that dynamic happening, right?

11:10Like, so if you were to, if you were frozen for the last 15 years, and they showed you this, you'd be like, what? This is the mayor, this is like, you know, the CEO and CTO of like, or I don't know what Greg Rockman does anymore. But attend the Met Gala. Yes, yes. But like that, you know, the most significant, I guess, private technology company in the world, and they're just hanging out, You know, there's no, there's nothing really formal. There's nothing produced about it. And I think that that's really the moment that we're living in. So I thought that was really interesting from Dev Day yesterday.

11:42I love it. It felt, it felt like it borrowed. And maybe this is just me projecting too much because of Sam's prior role, but it felt very like Y Combinator Demo Day, where it's not just about like, why? It's about the full community. And like, it's a group of, like, and I think this was very much like a platform oriented announcement, right? Like developer focused announcement. And so I think the spirit of it was right, which was that it was about the community and not just about like a few open AI execs, like showing off some really flashy stuff. It's funny. I very much remember the, um, the, like Apple keynote being the gold standard, right?

12:24Like when we started doing events at Box, which was an enterprise software company, couldn't have been further from like, from Apple, but that that level of polish was the desire, right? And of course, Helen, as you were pointing out in the group chat the other day, like those were very much oriented around media too, as sort of the main audience for those events, or maybe at least like media as the intermediary to then go and tell the world and bring other people in. And so everything is much more controlled. Everything was much more orchestrated, multiple embargoes lifting at different times.

13:01Yeah, tons of gatekeeping, right? Lots of gatekeeping and like little contracts, not actual contracts, but like little social contracts among the reporters who are covering it. But this is like, I think they had 2000 people in attendance, which is not a lot, right? But every one of those 2000 people has a smartphone and a Twitter account and or LinkedIn or whatever. And they know that these are, you know, 2000 curated. yeah, influential people, influential people that. Yeah. So it's just a completely different time. And I think that, you know, they're they're definitely meeting the moment and they're doing it at a scale and in a way that like, you know, I think that that Apple and and Meta and like others just like aren't doing so.

13:50I also think there's just so much more tolerance for things being raw right now because things are moving so quickly, right? Like we're in the early phases of AI. OpenAI is moving at a crazy pace with, you know, the fact that they launched Sora 2 last week. And then this week they're talking about ChatGPT becoming like the new operating system for the internet. Like this is a company that's moving on a lot of fronts. And so like we're not looking for polish. Like it's all about speed and progress and experimenting, even some of their answers around, like, you know, they talked about hardware, but they didn't really have much to say.

14:30But like, that's okay. All of this is permissible because we know we're like, like on a new frontier and it's moving very quickly. And so, and so it's just like also fun to think about the broader context that makes this approach possible. What feels like TikTok has finally made its way to the enterprise you know enterprise always lags consumer and I think consumers have gravitated from like the polished Instagram yeah form to like the authentic and real TikTok and now and now companies are progressing which means that um we'll have to find the next thing that consumers are on to so I don't know what that is but I have to say it's interesting I was in Europe all of last week and I on the recommendation of a friend um had breakfast at the Wolseley which is this like institution in London and I was sitting down in these like leather booths with my physical copy of the newspaper at the Times and I think I went through the entire newspaper and did not see a single headline on like a tech company or AI.

15:29I mean there was there was an article about um how you know Prince William, Princess Kate, Princess Kate um don't let their children have phones for screen time. You know there was an article about what's happening in politics but literally nothing about open AI, nothing about Google, nothing about Anthropic. I literally felt like I was living in an alternate universe where AI didn't exist. That sounds like a one week vacation from, um, from AI. Meanwhile, New York was like losing its mind over the Anthropic coffee pop-up, which Helen, I think you saw. Oh, totally. I saw it on both Friday and Saturday, which is so funny.

16:10I just happened to be staying near there. So on Friday, I walked by, there was a line and it's like, there's lots of stuff that has lines in New York, you know, so it wasn't really obvious what it was. And it was a beautiful day. And then I got on Twitter and it's like, because I had just seen it in person, the Twitter photos actually, this is gonna sound weird it made it look better like they had like this beautiful filter and like this like kind of amber sheen on it that like you know everyone talks about aura these days like it had it had good aura like you know and like not to be confused with aura the ring the aura ring yes um and I was sort of like oh okay cool they're doing a pop-up they're giving away hats and it's a coffee shop and I think you know the story is the next day I saw that they ran out of hats and they said that they would have more hats at 9 a.m.

17:05the next day. So the next day I walked by again and this time I knew what it was and like the line was truly like wrapped around like multiple buildings. It was absurd and I think my comment on this, there's been so much commentary, there's like PhD dissertation level, you know, write-ups about like the analysis of, you know, how good this was and I'll just say like for me it was the classic like anti-position positioning, you know, what we just talked about with open AI and like speed and power and sort of like dominance. And it's like, yeah. And, and, you know, Anthropic, I think, continually chooses to be, and maybe I'm giving them more credit, you know, than, than, than necessary, but it's just like, it seems like they're choosing to intention that they're being intentional about, you know, being thoughtful and what they put out in the world and not competing like, oh, we're just as fast or we're just as powerful.

17:59It's like, oh, we're doing this other thing, something that we do uniquely well and better than anyone else. And the thing that I thought was so interesting was like, you know, they're obviously positioning themselves as anti-slop with like the thinking and the feeling and all of that. But also like all the things around this pop-up experience were so unscalable, right? Like think about it, like a line literally can't make the line go faster, hats that run out, coffee that's made by baristas, like they're people, they can't go faster. And I just felt like, oh, what a cool sort of like, I don't know, human grounding in the positioning.

18:35And I thought that that's something that somebody commented in our thread that like OpenAI just launched a campaign talking about humanity. Right. But like Anthropic kind of did like a show, did like a show not tell on this one. So I thought that was nice. I also I didn't think about this at the time, but the fact that it's like San Francisco Tech Week and Dev Day, Like the reason they did this in New York was probably like, like that geographical distance also probably enabled them to create like a very different space and feel. While meanwhile, in San Francisco, you know, OpenAI Dev Day, like very different vibe.

19:12I can't verify this at all, but I actually had a thought that like, I don't even know how intentional it was. Like, it's possible that this pop up was just very experimental and just like, let's try this thing. and it blew up and I just, and it might've been like booked six months ago, but we get interpreted on some of these things. Totally. So, so like, yeah, I think that that also speaks to just like, you can just do things right. Authenticity, try stuff. Like it doesn't need to be overly choreographed and like just perfect. Know who you are and try to pull that through into every experience.

19:46It's funny because the other big AI like moment in New York recently was the friend.com plastering of the subway with I don't know if you guys have seen those like pictures of those ads it's like a photo of their pendant and then like a definition of friend that's like someone who is there for you and listens and supports you or something and people hated it like really like people are like marking up the post which you know in some ways is a sign of a successful campaign it's got people talking whatever but like the response to the anthropic like coffee pop up was so unanimously positive. And so it's just like fun to see that contrast.

20:27I actually feel like this is a perfect transition to maybe like the bigger topic that we wanted to get into, which was like challenger brand status, right? And obviously like we're in this weird AI moment where everyone has crazy resources and all the players are growing really quickly. And so maybe it's not like the classic dynamic where there's one company that has a ton of market share in one company that's like, you know, like much smaller and going after, like, things are moving quickly. And the sort of like resources people have to put to work are immense. But we're definitely seeing like a challenger brand dynamic play out with Anthropic vis-a-vis open AI.

21:14And so I think that might be like a fun thing to unpack a little bit. like what does choosing the challenger position imply in terms of what are your advantages what does make it harder to do how do we see Anthropic doing this and like how is this playing out in tech more broadly I think it's an interesting framing because we also typically think of challenger brands as the small David going against the well-established Goliath but Open AI and Anthropic I mean they were all one team and then they split up so it wasn't like Open AI was already Goliath. So just interesting positioning of what we even mean when we say challenger, Brandon, and how the dynamics are maybe different when both are coming up versus one has been around for decades.

21:59And I think that's more of the typical framing. Although it is interesting because it is in Anthropik's DNA to challenge open AI, right? That's why those employees left and broke off was to provide an alternative to the future, the AI future open AI was building towards. And so there are many things about this that are not classic. Like we can talk through maybe some of like the most classic examples of like challenger brands. But like anthropic very much exists in opposition and in response to open AI. Whereas like open AI is not even talking about anthropic, right? It's just like doing its own thing, which is another sort of classic dynamic of like the Goliath, you know, sort of like pushing forward and maybe setting the tone for the market.

22:51And then the challenger, big part of their brand is like picking out what that player is doing. And that sort of, that doesn't happen in the reverse. Right. Those are like the classic rules of brands, right? The number one person never acknowledges competition or number two, whereas you see Coca-Cola in a Pepsi commercial, but you never see the reverse. Yeah, I think, you know, the other thing right now with AI companies, they're so well funded that it's really hard to paint any one of them in this sort of traditional, you know, David sort of character, which is interesting. And, you know, I'll say that, and I was telling you guys a story about Zuck when Google launched Google Plus and we were all nervous about what a success that that would be.

23:43I think that it's a really powerful thing to identify as the challenger, even if you are not, if that makes sense. There's a much more, I think, inspiring, motivating, rallying cry to say that all the odds are against you, right? Like that you are the underdog. And I think that great leaders are able to sort of evoke that spirit, regardless of how successful they become and the company becomes. And so what I find interesting is, you know, I think we're making this assumption that like, oh, well, Anthropic is the challenger. And internally, they must be like, oh, we are the underdog and we must fight and be more creative and find ways to fight against open AI.

24:34But it's like, we don't know the conversations happening inside open AI. They absolutely must see themselves as the underdog against Meta and Google and Microsoft and all of these incumbents. Right. So I think that psychology is pretty interesting. To your point about being a challenger, being such a good rallying cry, when you think about the most galvanizing moment in OpenAI's relatively short history, it's when Sam almost ousted. right they were they they were under under duress they were being challenged and you know the employees came together the tech ecosystem came together and like that was such a a powerful a powerful moment when they were like most under threat and and I think like you know Sam played that really well it became like uh like now you know now that we are like have restabilized the company like let's go do this and so I think you're right like Steve Jobs is another example of a leader for as long as he was leading Apple Apple was a challenger even even as it became like you know the market leader in categories literally created the spirit of challenger brand and his own story of like building the company and then being ousted for a much longer period like Sam Altman was like a couple days coming back and and having that comeback and people like love to root for a challenger.

26:01They love to root for a comeback. And so it's interesting to see that being like manufactured on shorter timelines. I was thinking about this exact point actually in relation to perplexity recently. And I thought it was such a smart move for them to take on Google and search as sort of their flag in the world because, you know, they were this tiny startup that no one knew about, but because they were challenging Google, every article they were mentioned against Google and these much larger companies and the just the earned media and the attention they got from positioning themselves as a challenger in this way was great.

26:37You know, they got so much more press and attention than, you know, other companies going after smaller, more niche spaces. And so it's just, it's an interesting concept, Ashley, to your point, that people like to root for the challenger. And if you position yourself that way, it doesn't matter. Like if you are successful yet, like people want to talk about you, people want to set up the dynamic and they're helping you on that arc. Yeah, 100%. Angela, I'm so glad you brought that up because like this is one of the things that drives me crazy sometimes about how like startups tell their stories is a lot of people like to pretend that no competition exists, right?

27:11Like they talk about their space, their challenges as if they are the only player. And I feel like one of the biggest things you have going for yourself as a startup is you are inherently a challenger and you are going after some sort of Goliath, whether it's a literal like Google or even if it's something a little bit more abstract. And like leaning into that drama is something that inspires people like emotionally to like want, it taps into, it taps in our desire to like root for the, root for the David, root for the underdog. And I think like perplexity is a beautiful example of, of doing that.

27:51They went after Google and search very early on before they really had a right to, right? Like from any, any trap, like from a traction perspective. And to your point, it really benefited them from an earned media perspective too, because when you think about the universe of reporters who are interested in covering early startups, it's very small, especially these days as like most, most journalists are pulled into covering like these like multi-billion dollar funding rounds and all of these big moves of the largest players. But the biggest companies all have beat reporters. And part of their mandate is to cover any challengers to the companies that they cover.

28:34And so if you do an effective job of positioning yourself as that challenger, you can get on the radar of all of these much bigger publications and beat reporters than you would if you're just like, oh, hey, we're a startup that's going to change the way you use our internet and not making any mention of like, oh, no, we're going after Google and we're taking their market share. Totally. I think that in this example, it was like a little bit, I don't know, I really struggle with the AI companies that have just raised so much money to be like, wait, you know what I mean? It's like, we know, we know that that's the story.

29:12That's how you raised the money, that they have this big ambitious goal. Well, the money reinforces the story for sure, right? So it's like you're really squeezing the sympathy from reporters and people sort of looking at the David and Goliath framing. It's hard to be a true David these days. Like you have more than stones to throw for sure. That's right. I mean, you know, one thing I thought of was like I think a lot of emerging managers do a good job of the David and Goliath story or like small funds, you know, of like smaller funds against the mega funds or the tier ones in this environment.