The biggest startup opportunity during a technology shift is not to attack an incumbent head-on, but to position between two established players, since incumbents will always protect their existing product line by bolting AI onto it rather than replacing it.
Sinofsky argues the smartest startup strategy is to avoid direct competition with entrenched enterprise incumbents and instead occupy the space between two established players, since incumbents will defend their existing products rather than replace them — much like HTTP/HTML displaced client-server not by replicating it but by reinventing it. ✦ AI generated
Stephen Sinofsky · a16z Podcast · 2026-07-07 · original ↗
starts at this moment · 54:01
“Where are we really seeing the biggest opportunities for startups right now?”
The biggest opportunity right now is always always to look at the existing sort of mental map of enterprise categories and be in between two established players because the thing that you know right now during a massive technology shift is the one thing that established players won't do is disturb their existing product line and go to market... your opportunity in a startup is to just look at two big players who are bolting AI onto the side... and aim for the middle and do things in the new way.
verbatim transcript · starts at 54:01
54:01pulling that back in. So like construction, manufacturing, all of that. Well, the universal truth for enterprise software is the the most difficult thing to do that happens to be the dumbest is to attempt to just compete head-on with with an existing category. And and by head-on, I mean not just the same category, but doing it the same way. The biggest opportunity right now is always always to look at the
54:29existing uh sort of mental map of enterprise categories and be in between two established players because the thing that you know right now during a massive technology shift is the one thing that established players won't do is disturb their existing product line and go to market. So they absolutely will just be bolting AI on top of their existing product. They they won't be getting rid of it. They won't stop working on it.
54:57They won't do anything to to break it. They're just going to try to weather this technology storm by sort of power throughing it, powering powering through it. And so your opportunity in a startup is to just look at two big players who are bolting AI onto the side and exposing some existing API as an agent or whatever and just aim for the middle and do things in in the new way and the
55:23new way. And by not attacking head-on, you don't show up at every single customer and have them go, you know, well, you need to the do these 8,000 things before you even enter the door. Instead, you have a equally difficult question, but one you're in control of. It's which is why do you even exist? And and that but you that's your own question. You you don't have to answer
55:45to a a series of 20-year frameworks that a 20-year-old framework that got created to answer a bunch of questions that aren't even relevant anymore. And and the best example of this is is is HTTP and HTML. client server existed, but the reason that those took over was not because it did all the things that client server did. In fact, it did none of them, but it implemented that concept
- ·Biggest startup opportunity: gap between two established players
- ·Incumbents won't disturb their existing product line
- ·They bolt AI onto old products instead of replacing them
- ·Startups should target the space between two big incumbents
- ·Both rivals are just bolting AI onto legacy offerings
- ·Precedent: HTTP/HTML displaced client-server by reinvention, not imitation