#15 Picks and Shovels
Ampersand Capital is one of the best performing VC-firms of all time.
And you’ve probably never heard of them.
Their thesis is simple; invest in healthcare companies that don’t require regulatory approval. These are the companies that make equipment, measuring devices, breed lab rats etc. that power the HC industry.
While one pharmaceutical drug may take 10+ years and billions of dollars to bring to market, the “boring” material companies that power pharma’s R&D generate mountains of profit for the entire duration of the development lifecycle.
These are the picks and shovels. Highly profitable and highly successful companies that are the backbone that power large markets. Sure bets.
The term comes from the Gold Rush in the 1800’s. Many people went West looking to strike it rich by prospecting Gold, but very few did. All the people who sold the prospectors picks and shovels, however, became very rich.
In 2023 - while still recovering from a COVID-stimulus induced tech bubble - we are on the verge of even more frothiness thanks to the emergence of ChatGPT and the power of generative AI.
Dozens of new edge-case, AI software platforms are emerging daily.
Personally, I’ve evaluated 5 different AI Copywriting tools to personalize sales emails at scale. All of them indistinguishable from each other.
As a sales person it is way too early in AI’s market development to determine which platform will be the game changing businesses that will sustain for the long term.
So don’t jump ship yet. In fact, GTM motions may get so efficient with these products they will grow without the need for more than 1 or 2 sales people.
If I were a salesperson looking to get into the AI space, I’d stay far away from solutions that touch the end user.
I would find a role at either OpenAI or one of the big tech companies. They are the only sure bet companies at this point as they are powering the large language models (“LLMs”) that all end-user AI products will be built on top of.
The other companies that will win are boutique service firms that specialize in implementing and optimizing the technology to ensure business outcomes are met.
Deloitte, Accenture, KPMG, etc. are the obvious names that come to mind. But there are so many boutique service businesses that are highly profitable from day one, and are only limited by the resource constraints of their staff.
If you want to bet on a sure thing, go to a firm that specializes in servicing AI platforms - they are the picks and shovels that will make AI work.