The wave of startups creating AI propositions built on top of AI tech keeps growing 🚀 While augmentation propositions remain dominant, Autonomous and AIaaS are emerging as strong contenders.
Economists are already factoring in AI to boost GDP growth over the next five years—at least 0.5% uplift on average p.a. While incumbent tech companies invest heavily in big AI infrastructure to develop foundation models, smaller startups can still contribute and even dominate some segments at scale.
Y Combinator
Over the last five years (2021–2025), every startup in each Y Combinator cohort was analysed to determine its primary AI proposition (Automation, Augmentation, Autonomous, or Other), AI technology dependency, platform model, and revenue model. During that period, Y Combinator backed 2,538 startups from 67 countries (64% in the U.S.), spanning 40 industries.
Insights
The AI momentum is real, with Y Combinator going all in with AI:
AI Propositions & Usage
- AI Tech usage in the stack is now at 87%, up significantly from 30% in 2021.
- AI Augmentation and AI Automation remain steady at 65%, and 19% respectively.
- AI Autonomous is the big mover, rising to over 12% from 2%.
- Productivity startups (both Augmentation & Automation) form 25%.
- All other non-AI related propositions dropping to less than 2%!
Platform & Revenue Models
- New AIaaS platform models are evolving fast at 8%, up from 1% in 2021.
- Revenue models are dominated by Subscriptions at 75%, even higher for AIaaS at 83%, but Transaction fees at 11% remain a strong alternative.
- SaaS is somewhat under pressure but has not collapsed, holding at 57%. Marketplaces at 10% are the next favoured platform model, followed by AIaaS.
Takeaways
YCombinator is betting big on AI: While AI Tech usage is becoming the norm, and Augmentation and Automation hold their share, the riskier long game of Autonomous has attracted significant backing.
SaaS is under pressure but holding: With the strong rise of AIaaS, whether SaaS will fade or morph into AIaaS remains to be seen. Perhaps AIaaS will power new forms of SaaS, ones where human-centric design patterns need rethinking.
Subscription revenues are Y Combinator’s preferred revenue model and by far the preferred revenue model of AIaaS platforms.
How far will the Autonomous segment keep growing? The rise of Autonomous systems and AIaaS seems certain to continue, disrupting future business models and people management in significant, transformative ways. For now, Augmentation, where human decision-making is enhanced by AI capabilities, is the favoured approach.
