How to Build a Category-Defining AI Startup

Why the Next Generation of AI Startups is Marketing-Led

AI is the new electricity

Once just an abstract concept, electricity soon lit up our cities, extending our time, powering our machines, and revolutionizing how we live and work. This transformation didn't happen overnight; it took visionaries like Franklin, Volta, and Faraday who saw beyond the immediate thought experiment to its vast potential across industries. 

As we stand on the brink of the generative AI era, we're at a similar crossroads. Just as electricity found its way into every corner of our lives, AI will permeate every industry, offering myriads of applications that are already redefining our world before our eyes.

Founders and CEOs are daringly exploring how AI can not just automate but reinvent their operations, with startups emerging at every layer of the stack — from silicon to compute and cloud providers, foundational models, infrastructure, LLM Ops, and horizontal and vertical application platforms.

The AI rally shows in the investment landscape, with $21 billion funneled into 400+ Gen AI deals in 2023. A staggering 75%+ of these ventures are early-stage or bootstrapped; another signal of the vibrant AI ecosystem. This momentum is expected to not only continue but accelerate into 2024, as both established tech giants and startups vie to capitalize on Gen AI's vast potential.

The Hyper-Competitive AI Market Calls for Differentiation

This rapid emergence of companies and products across the Gen AI stack presents a significant challenge to emerge in a hyper-crowded and hyper-fast-moving market. The urgency to differentiate and communicate value becomes more paramount than ever. To put additional pressure on founders, the timeline to achieve product-market fit and demonstrate customer traction has significantly compressed, forcing companies to prove their role and secure a foothold in the landscape, as waiting for full product functionality is a luxury no one can afford

In the last few weeks, several LLMs have launched both open- and closed-source from existing or new players, each outperforming others. Similarly, vector databases emerged as a new category last year and now there are several new entrants and existing database players entering the market making it even more competitive.

As the stack continues to evolve rapidly, the market gets more crowded, and as you move up the stack you start facing both new entrants building those capabilities and big tech incumbents expanding across the stack.

These challenges make it critical to be a top-of-mind brand in a market that changes daily. Unless you are a top-three in your category and are growing your mindshare with your audience, you won’t survive long. With the pressure to demonstrate unique value before reaching PMF, and continue to scale revenue after initial traction — or a new funding round — the question arises. 

How can early-stage AI startups emerge amidst the noise and become category-defining leaders? What strategies should they invest in to conquer their market share, ensuring they drive recognition and adoption amidst a sea of competitors?

It's Time for a Paradigm Shift

Traditional B2B SaaS products follow a sequential path: defining features, building the product, testing with users, and refining based on feedback. Marketing often plays a catch-up role, promoting a finished product once it has found early traction, and there’s already a sales team craving for leads.

This just won't fly with Generative AI, and here's why; the entire landscape — made of the product, the technology, the target market, and user problems — is in constant flux. 

Every week brings breakthrough capabilities and new applications that reshape what’s been on the market until yesterday. Products become obsolete in a matter of weeks, or if you are lucky, a few months. 

In this dynamic landscape, the role of marketing must fundamentally shift. 

• Marketers can no longer wait for the finished product — they must be at the forefront, articulating the company's bold vision for the future, positioning the organization as a category leader, and educating the market on the transformative potential of this technology.

• It's also about crafting a crisp narrative, establishing differentiation, and building the brand of the people behind this vision and the company driving it. In the generative AI space, marketing isn't just about what's on the truck today, but about defining the curve, convincing the market why your company is best positioned to lead the way, and guiding the product strategy to achieve that.

• Marketing needs to build a moat bigger than the product itself. To emerge in a hyper-competitive Gen AI market, founders must embrace a marketing-led approach.

Let’s dive into each aspect in more detail.

1. The Importance of Category Creation and Positioning in the AI Landscape

New AI categories are being formed and existing ones are being disrupted at a dizzying pace. The window of opportunity is narrow, but the potential upside is immense. Successful AI companies will be those that can clearly define the market category they aim to enter and lead, articulating a compelling, differentiated positioning.

This is where marketing takes center stage, spearheading the category creation process in lockstep with the executive team, product, and technology. Drawing on deep market and competitive intelligence, as well as direct customer insights, marketing must lead the charge in identifying the right category to target, crafting a compelling differentiated positioning, and articulating a solid case for long-term leadership.

Crucially, this positioning can't be static — it must evolve constantly, adapting to the market's changing needs and new technological breakthroughs. By shaping the product roadmap and ensuring the positioning is maintained, marketing plays a vital role in propelling the AI company to the forefront as an industry leader.

For example, Cohere has been successful in defining and owning the "Enterprise AI" category for LLMs. When I was leading marketing at Cohere, we did so by carving out a clear and differentiated positioning compared to behemoths like Open AI and Anthropic, establishing ourselves as the go-to provider for sophisticated enterprises. We’ve been consistent in our category messaging and leveraged all our announcements across funding, product launches, events, website, and partners to carve out the category and own it.

In this high-stakes arena, category creation has become marketing's driving mission. 

By masterfully defining the right category and dynamically updating the positioning, marketing can help an AI company achieve transformative leadership. It's a role that demands deep technical acumen, strategic vision, and relentless adaptability.

2. Simultaneous GTM Strategies

Historically, successful startups go to market with one motion — either PLG bottom-up or Enterprise top-down — and then layer the other one on top. However, for Gen AI companies adopting a singular go-to-market strategy won’t be enough. 

Effective market penetration now demands a new level of complexity — the simultaneous execution of not two but three concurrent go-to-market motions — bottom-up product-led growth (PLG), top-down enterprise sales, and partnerships — serving multiple segments at once. Each serves a specific purpose:

• PLG will foster brand recognition and technical credibility, with innovative products and research that will conquer the hearts and minds of the (non-) technical community, driving word of mouth and scaled feedback to influence the product roadmap and build the brand.

• Top-down enterprise sales and partnerships are critical for driving sustainable revenue and cementing credibility at the executive level. By securing large enterprise customers and forging strategic alliances, these high-touch channels ensure speedy market penetration that reinforces the brand at the top of the funnel while earning sustainable and scaled revenue. Specifically:

  • Top-down Enterprise. Every board is asking their CEO about their Gen AI strategy. Your AI company must be top of mind for the C-suite because AI is top of mind for them! They are the executive sponsor and will involve their AI/ML or engineering teams in the conversation because it’s among their top priority.

  • Partnerships. Every enterprise, system integrator, and cloud providers want to offer generative AI solutions to their customers. They are looking to partner with AI players either above or below their (level of the) stack of their core competency. This creates a unique moat opportunity for startups to get co-marketing and distribution muscle via these partners to cross-share customers with a joint GTM motion.

In this ever-complex GTM scenario, the challenge for marketing is clear: they must develop dedicated, coordinated strategies for each motion from the get-go. The stakes are high, but the potential rewards are transformative. By striking the right balance, AI companies can foster rapid adoption, and drive exponential revenue stacked across all the GTM motions.

Need help defining and owning your GTM strategy for your AI startup? Access a plethora of advisors who’ve been leading growth at late-stage AI startups already to secure and fast-track your trajectory.

3. Building Credibility Beyond the Product

In this accelerated generative AI market, the true trailblazers will be those who can shape — and own — the industry conversation way before their full product is ready on the market. That's because it's not only the funding cycle that's at a peak but the news cycle as well. 

Waiting until your product is perfected to start making waves is a luxury you don’t have in AI. If you wait to start marketing when you’re ready to go to market, you'll be already 6 months behind.

That’s why marketing's role must transcend the traditional focus on creating positioning, awareness, and demand for your product among core buyer personas. To truly establish your company as an industry luminary and harvest credibility beyond your product, you need to cultivate relationships with a diverse array of influential stakeholders — AI policymakers, the press, research and developer communities, government leaders, and other key players shaping the generative AI conversation in your category.

It's no longer enough to simply promote "what's on the truck today", a.k.a. your product. Instead, marketing must take a bold, forward-looking stance, articulating your long-term roadmap and showcasing how your company's innovation will transform the future trajectory of AI. This is about shaping the industry narrative, rather than just reacting to it.

At Cohere, we did so by building a brand vision around the executive team. We’ve invested resources so that the CEO and the founding team could share their provocative take on the future of AI targeting specifically decision-makers of the sales- and partnership-led motions — C-suites, executives, and policymakers.

Specifically, we’ve secured speaking slots at the Davos World Economic Forum Panel and published in related publications to ensure that we got on the map of every single world leader and positioned ourselves as a cutting-edge company at the forefront of AI. We’ve completed this presence also by speaking at major events like Collision, National TV broadcasts, and major publications; every channel reinforcing the ever-evolving yet bold vision of the founders.

As mentioned before, Cohere’s corporate and brand communications were integrated by sharing upcoming products and partnership announcements ahead of time as “coming soon”, generating hype and solid brand awareness.

4. Every Marketing Functions Must Have a Growth Mindset

To stay ahead of this market, you need to find new creative levers all the time. You can’t just go through the B2B SaaS playbook. And you can’t just do this in growth marketing, but it becomes an integral part of all marketing functions, especially across Product Marketing, PR & Communications, but also Revenue marketing, and Developer Relations.

Traditional SaaS growth is applied to either bottom-up adoption or top-down demand generation. However, Marketing teams in AI-first companies will need to share a growth mindset across all their functions to meaningfully shape and influence their areas and contribute to category creation and leadership.

It won’t be enough to have the latest tools to create SEO content, demand through paid marketing or automate lead scoring. Growth Marketing and Growth Product teams won’t be the only ones to run AB tests and experiments. In this new game, even PR & Comms, Brand, Product Marketing, Partner Marketing, and Research must embrace the high-velocity, risk-taking attitude of growth teams.

Successful marketing-led motions will focus on extremely lean operations, velocity, tight feedback loops, and focus on concrete outcomes. These cultural defaults require teams with not just functional expertise, but think-on-your-feet, highly resilient, persistent, and adaptable talent. 

While the right talent mix will depend on your category, it could involve hustling your way to the White House AI forums, arranging a roadshow for your leadership and tech team to speak at important events, partnering with your research team to serve the community through open source products or building an entire educational program to create a Generative AI economy for developers. Or educating every reporter of top publications on your narrative to get press mentions every time your competitors are mentioned.

An effective tactic to go against the grain is crafting and owning controversial and memorable opinions around hot topics. Remember the “AI Doomsday” narrative? Leaders from several big AI companies signed a letter warning humanity about the “risks of AI”. However, Cohere’s founders didn’t share that narrative and worked on an opinion piece to counter the mainstream narrative and drive instead their ‘value additive’ vision — educating the market on what the industry should focus on instead. Now, that’s an innovative way to get your company on the map, own the narrative, and rapidly gain mindshare. 

Regardless of the tactics you embrace, everything you do should be focused on penetrating your target market, not following the herd on those topics. The best part is that these initiatives are completely independent of product readiness and new features; when the growth mindset is distributed across all your Marketing functions, you will even move faster, as there won’t be any execution dependencies on product or other teams. This is how you can make things happen.

How do you embrace and distribute a true growth mindset across your org? Let us help you source the best talent and assist them with world-class growth leaders.

It's Time for a Paradigm Shift

This requires the marketing team to place a few long-term bets on how the market will evolve and what will drive a sustainable long-term advantage. At Cohere, we’ve made an early investment in building the LLM University — an initiative to upskill developers on the technology, even before the ChatGPT hype stemmed, from the conviction about the skilled resource gap in the AI market. 

This not only boosted Cohere's technical credibility and drove huge traffic, but also helped accelerate the pipeline of potential customers. At some point, this investment alone generated 40% of all Cohere traffic!

Closing thoughts

To successfully stand out in the hyper-competitive Gen AI landscape, startups must embrace a new marketing-led approach, investing early not just in simultaneous GTM strategies, but in shifting marketing from a support and distribution function to a core strategy, where all its teams share a high-velocity, risk-taking growth mindset. This shift involves forecasting future industry directions, redefining product roadmaps through visionary leadership, and executing both bottom-up and top-down marketing strategies concurrently. 

Emphasizing marketing's strategic role ensures products remain relevant and competitive, driving rapid penetration and establishing a solid, beloved brand. This approach not only differentiates companies in a crowded field but also paves the way for sustainable growth and industry leadership.

This heightened complexity brings a burdening question. How do you execute multiple and concurrent GTM motions? And what resources do you need to pull this off? How do you hire a team that builds a category-defining AI startup?

Stick around to find out in the next posts of this series.