What Counts as an AI Startup?

Lawmakers are largely supportive of helping AI startups and challengers grow and thrive. They understand the need for the United States to compete and win in AI and generally support small businesses and entrepreneurship. Yet, numerous state AI proposals—while intended to put safeguards in place for the biggest players—still risk sweeping in the startups at the forefront of AI innovation. The tools lawmakers reach for to carve out Little Tech, including compute and training-cost thresholds, aren’t built for the realities of how AI is made today.In this conversation, Guido Appenzeller, investing partner, and Matt Perault, head of AI policy at a16z, discuss why thresholds based on either compute power and training costs fail to separate Little Tech from larger developers, and why revenue may be a more effective criteria for establishing what counts as an AI startup.Topics covered:01:33: Realities of startup teams building AI models03:57: Challenges of defining frontier models by compute06:46: Why competition at the frontier is key to US success 10:45: Practicalities of building and training AI models today13:24: Why training-cost thresholds fail16:47: When startups hit $100M in training spend24:16: Revenue as an alternative metric to focus on use and market impact28:09: Revenue as a clearer metric31:48: Implications for startups33:17: Loopholes to game thresholds34:56: Closing thoughtsResources:Follow Matt Perault: https://x.com/MattPeraultFollow Guido Appenzeller: https://x.com/appenzStay updated:Subscribe to the a16z AI Policy Brief: https://a16zpolicy.substack.com/Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit a16zpolicy.substack.com