SMALL is the New Big — Embracing Efficiency in the Age of AI

The new mark of a standout Founder is no longer how big they can make their staff — it's how small they can keep it.

Oh, how times have changed, my friends. For hundreds of years, we graded the value and success of a company based on how "big" it had become, and headcount was always the leading indicator. "We've scaled to 1,000 people!" would have been the badge of honor up until the past year, and now it begs the most obvious question, "Why?"

We're entering the Age of Efficiency, where we are rewarded not for a bloated headcount but for a tiny headcount that can produce even greater output. And I've got to say — I couldn't be happier about it because, as startups, this is the dream we've all been waiting for.

AI Changed the Game

Let's start with the digitally created elephant in the room — the rise of AI. If you haven't been following along closely (most haven't), AI is going to replace or streamline nearly every function of our startups, whether we like it or not. Instead of worrying about "AI taking jobs," as Founders, we need to think in terms of "I can get 10x more done with the same staffing expense".

As a Founder who has been scaling startups for 30 years, I can tell you that every function, from Customer Support to Marketing to Engineering, is on the cusp of being completely rebuilt. Do you have 20 people answering customer support emails? Within 2 years, that'll be 2 people, maybe 1.

More importantly, any startup that hasn't consolidated that function, and really the Founders like us, will be heavily penalized. If it's not investors who are going to come to expect us to produce the same results at a fraction of the cost, it'll be our competitors who will be running circles around us if we don't.

The New Cost of Small

No one should be more excited about these changes than us Founders. Overnight, our cost of building a company will have shrunk geometrically. This isn't the first time this happened, by the way. At the end of the Dot Com Crash in the early 2000's, the cost of everything, from servers to online marketing, got cut by orders of magnitude, ushering in an entire new era of startups that could be built by 2 people in a room with $0.

The difference this time around is that we're shrinking the biggest line item we have—staff. At Startups.com, we look at thousands of pitch decks, and I can tell you firsthand that the largest line item in every one of those "Use of Funds" slides is overwhelmingly staff. But what happens when it's not?

Imagine being able to scale a company on $1 million in investment, whereas it used to take $10 million to do the same thing. Also, in half the time. If that sounds ridiculous, let's go back to my point a moment ago, which was that it had already happened back in the early 2000s with non-staff-related expenses. It's most certainly happening again.

Be Proud, Be Small

Sam Altman, the CEO of OpenAI (ChatGPT), recently said there was an inside bet among Silicon Valley insiders as to when we'd see the first company hit a billion-dollar valuation with a single employee. Someone is going to win that bet within the next 5 years. While that's happening, we're about to see a shift in how we perceive the size of our startups.

Imagine if we could do everything we ever wanted with a staff of 10 or 20 people. Instead of constantly raising money to staff up, or worse, lying in bed at 3 in the morning every night wondering how we're going to service some massive payroll, we were more focused on how fast we could scale the actual business.

This all starts with a fundamental shift in how we think about efficiency. We need to begin questioning every new expense, especially staffing. When it comes to bulking up our staff, we need to replace the question of "Who are we hiring" with the question of "Why are we hiring at all?”

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