The key distinction between lighthouse and land grab markets is proof versus math: lighthouse markets require proving you're safe to buy from (proof travels), while land grab markets let you simply show superior ROI (math).
Joe explains that in lighthouse markets (regulated industries with few logos), the buyer risk is so high that social proof of safety is essential; in land grab markets, established budgets exist and buyers can be convinced purely through ROI math. ✦ AI generated
Joe Schmidt · a16z Podcast · 2026-08-13 · original ↗
starts at this moment · 4:19
And so I think those are actually quite different and if you think about the standard markets that fit into the lighthouse model, it's, you know, regulated industries. Often times there's a more constricted number of logos. If you're wrong in the industry, like if the buyer buys the wrong piece of software and it ends up doing the wrong thing, it can lead to very bad things happening for your firm, including, you know, potentially getting in trouble with the regulator, even doing something illegal. That's very bad, of course. And then on the flip side, when you're looking at the more of a land grab market, there's an established budget. People have very, you know, used to and accustomed to paying for a type of service, and you can kind of come in there and show like the end buyer the math of like, hey, my solution is better than whatever solution you're using today, whether that's a software driven solution or human driven solution. So, the kind of distinction that we drew was between like proof on the top right of the quadrant and math on the bottom left of the quadrant.
verbatim transcript · starts at 4:19
3:59know, low low uh you know, low proof traveling, but also low buyer exposure. Uh and that would be a land grab market. Um and so I think those are actually quite different and if you think about the the, you know, the standard markets that fit into the lighthouse model, it's, you know, regulated industries. Often times there's a a more constricted number of logos. Um if you're wrong in
4:19the industry, like if the buyer buys the wrong piece of software and it ends up doing the wrong thing, uh it can lead to a you know, very bad things happening for your firm, uh including, you know, potentially getting in trouble with the regulator, you know, even going uh and and doing something illegal. That's very bad, uh of course. Um and then uh you know, on the on the flip side, when you
4:36when you're looking at the more of a land grab market, there's an established budget. People have very, you know, used to and accustomed to paying for a type of service, and you can kind of come in there and show like the end buyer the math of like, "Hey, my solution is better than whatever solution you're you're using today, whether that's, you know, a software driven solution or
4:53human driven solution." So, you know, the the the kind of distinction that we drew was between like proof on the the top right of the of the of the quadrant and math on the bottom left of the of the quadrant. Um and that's how we kind of thought about the framework. >> Yeah, and >> Andy, we'll get into your background uh in a little bit, but I think first maybe
5:10it's it's good to kind of categorize some of these modern day AI startups within these two frameworks. And I know you both work with a lot of these companies. >> Yeah. So, so Joe, I'm not sure if you want to call out specific examples or Andy, if you want to call out specific examples and really just kind of like talk through the the sales strategies that you're seeing.
5:29>> Yeah, I mean, well, you're like, you know, the the the land grab uh you know, mastermind. So, maybe you want to talk about some of the stuff that you've seen. >> Yeah, well, I mean, yeah, I think you you framed it up really well in in your in your article, but um yeah, I think that concept of like the the lighthouse being more in industries that require,
5:45you know, regulation, a lot of social proof, and so forth. And those tend to be companies that are going after like a category creation, right? It doesn't exist today, so therefore you got to go out and you got to kind of prove yourself with the big the big names. And obviously we have a bunch of portfolio companies out there. There's a there's a bunch of the companies that I think you