Hi there, Welcome to the 141st edition of Heartcore Insights, curated with 🖤 by the Heartcore Team. If you missed the past newsletters, you can catch up here. Now, let’s dive in! Selling the Outcome, Owning the AccountabilityOver the past six months, I’ve met dozens of founders ideating across Europe, and one topic kept coming up: AI-native services. Funds like Sequoia, Bessemer or Emergence have already sized the TAM and identified promising categories. I want to review what the most compelling ones I’ve seen have in common. First, outsourced accountabilityIn some industries, clients want someone external to be accountable for the work. Companies need an auditor to certify their accounts, importers a customs broker to clear their goods, insurers an actuary to sign off on their reserves. What the client buys is not only the work, but someone who answers for it. A software vendor can make these firms fasters, but it can’t take on that responsibility. At Repodo, a Danish AI-native audit firm, one of the co-founders is an auditor and signs the accounts. Second, third-party verificationTo be paid on outcomes, you need an outcome nobody can argue with. The best case is when someone outside the deal, neither the client nor the vendor, confirms it happened. That’s how the oldest outcome-based services already work: a debt collector is paid on the money actually recovered, a recruiter when the candidate is actually hired. Without that referee, either the vendor defines success or every invoice becomes a negotiation. The flip side: you’re paid on something you don’t fully control, so keeping the direct relationship with the end client matters. Third, the expert bottleneckThese are often markets where demand is constrained because the expert is the bottleneck. AI multiplies what an expert can cover, which lifts that constraint. Davis 🖤 delivers feasibility studies and architectural designs in days rather than months, allowing developers to assess many more opportunities. And, in other markets, the issue is access. The service exists, but only some companies can afford it. AI makes the same work faster and cheaper, which opens it to others. Huscarl, for instance, uses AI to make insurance captives accessible to companies that couldn’t afford one before. Making it VC-BackableAre these three traits enough to be VC-backable? If the work is one-off, it can still be a good business but not a venture-scale one. You need recurrence, and I’ve seen 3 ways to get it. The work itself, when the obligation recurs every year, like a statutory audit. The contract, when a client commits to volume. Or the product, when an engagement opens the door to software. For example, Mondrio does project-based pricing work today, but the bet is that pricing should not stay a one-off exercise: monitor it continuously, then eventually become part of the pricing stack for the agent economy. Pricing is the next angle. Incumbents mostly bill by the hour, so every hour AI saves is an hour they can no longer invoice. But fixed pricing per deliverable is still exposed. If competitors use the same models, prices can fall for everyone. The most interesting model, to me, is to price against value created, or by taking responsibility for the whole project. Morreon, a European AI-native engineering firm, runs energy projects end to end, from design to construction management, and is paid a share of the capex built rather than by the hour. The client never sees the production cost, so when AI brings it down, the gain stays in the margin. What makes that shift possible is what I think of as the red pen: the corrections an expert makes before signing off. They show where the agentic system still gets things wrong. The more of them you collect, the better you know how often your work is right, so the more you can afford to be paid only when it works, rather than a fixed price for delivering it. One metric worth tracking is revenue per expert: the revenue generated per person whose judgment is sold to the client. To reach software margins, it should be several times what an expert bills in a traditional firm. As always, if you are building in this space, we’d love to talk. ~Bérenger Teboul-Danguin, Investor, Heartcore Capital
🖤 Heartcore News
Thank you for being a loyal subscriber of our monthly Insights. Please feel free to share this newsletter with anyone you’d think would appreciate it!
|
No comments:
Post a Comment