Key Takeaways

  • USV General Partner Mike Mignano sees the AI infrastructure buildout reaching a crucial point, much like early internet fiber, making now the time for a boom in application-layer innovation.
  • USV's core investment thesis for AI is to back companies that "obliterate" existing markets and business models, rather than simply automating current processes.
  • This strategy challenges perspectives, like Brandon at McCor's, which predict more value accruing at the AI infrastructure layer over the next two years. Mignano acknowledges ongoing infrastructure value but expects "massive value creation" at the application level.
  • An example of USV's "obliterate" approach is their interest in startups like Doctronic, aiming to put a doctor in everyone's pocket and fundamentally reinvent healthcare delivery.
  • This entire approach is captured in USV's "Obliterate, Don't Automate" Investment Philosophy.

The USV's "Obliterate, Don't Automate" Investment Philosophy

Mike Mignano and USV have a clear rule for where they place their bets in the AI application space. It’s not about making existing things slightly better; it’s about making old ways obsolete.

  • Don't Automate: Automate existing workflows, existing processes.
  • Obliterate: Literally obliterate markets and existing business models... reinvent the way something is done.

When This Works (and When It Doesn't)

Mignano makes it clear that USV wants to invest in businesses that “literally reinvent the way something is done.” He points to Doctronic as a prime example, illustrating the idea of “AI putting a doctor in literally everyone's pocket.” This philosophy works best when a fundamental technological shift, like powerful, accessible AI models and agents, enables entirely new ways to deliver a product or service. The key is that the new method must be so superior or accessible that it creates a new market or dramatically reshapes an existing one, making the old models uncompetitive.

However, this approach doesn't work if your "obliteration" relies on incremental improvements or features that existing market leaders can easily integrate. True obliteration requires a step-function change in value, cost, or accessibility that incumbents cannot match without tearing down their own profitable legacy systems. It also inherently means higher risk and often longer development cycles compared to building automation tools for existing, validated workflows. Many founders might find significant initial traction and value creation in automating inefficient tasks, even if it doesn't meet the "obliteration" bar.

What to Do With This

As a founder building in AI, take a hard look at your product today. Before you write another line of code, apply USV's framework: Are you building a better version of something that already exists, or are you creating an entirely new category? If your AI simply automates an existing workflow, challenge yourself: What would it take for your solution to "obliterate" that market instead? Can you use AI to reduce costs by 10x, increase access to 100x more people, or enable a service that was previously impossible? If your answer is still automation, at least understand that you're playing a different game than the one USV is betting on.