In the AI era, having product-market fit no longer guarantees a durable, scalable business, because companies can scale their AI costs into bankruptcy.
Unlike the SaaS era where product-market fit essentially guaranteed a durable business, Lin Qiao says many AI startups now have real customer demand but can't afford to scale because inference costs would bankrupt them. ✦ AI generated
Lin Qiao · 20VC · 2026-07-20 · original ↗
starts at this moment · 15:26
“So are these companies actually dramatically overvalued and overestimated if the majority can just go through open?”
for startups you know we have great companies they have product market fit customer want to pay them and they really value their product but they cannot scale because once they scale they could scale into bankruptcy. Have you heard about scaling to bankruptcy? So that's a real problem.
verbatim transcript · starts at 15:26
15:26even worry about that as your [ __ ] and now product market fit and durable business are two separate concept um for startups you know we have great companies they have product market fit customer want to pay them and they really value their product but they cannot scale because once they scale they could scale into bankruptcy. Have you heard about scaling to bankruptcy? So that's a real problem. Um
15:53it's even a bigger problem for incumbents. So the big companies for digital native um because they have the traffic they have huge amount of traffic. get a winner from a decade ago when we they were startups and they have so much traffic once they roll out uh those AI features they're going to reach to all their customer base and they cannot afford to do it because their CFO
16:16look at their um cost proposal cost forecasting is kind of there's no way you can justify this right so so then it becomes a real problem to all those innovators hey we really want to plug in to this new technology, new disruptive technology, but we cannot afford it. Um, and we need to find an alternative to be able to afford it. And the alternative is to have the control over your open
16:45weights model and roll out your own model. >> It is or you see what Sam Alman's released in the last few days, which is just dramatically lower cost models. I I can't remember the amount it is, but I think it's like half as expensive or maybe three times cheaper. Um, is the next step actually we just see a massive reduction in price from the frontier models? I it could be but I think at the
17:10same time it's just a very different uh operating principle because um for for open waste model because it's just there basically model uh acquisition has no cost right no obviously some company train those models um and willing to open it up I I know within US um there There are multiple companies doing that including Nvidia is training Neimotron. Uh we're working obviously very closely with them. >> Um so once the model is there