The New Way To Build A Startup

If you haven't tried Claude Code in the last month, it's time to give it another shot. And if you have, you know what I'm talking about. It feels like AGI is here. One of Anthropic's own engineers writes, "Claude wrote Cowork. Us humans meet in person to discuss foundational architectural and product decisions, but all of us devs manage anywhere between three to eight Claude instances, implementing features, fixing bugs, or researching potential solutions."

Think about what that means. The team developing one of the most sophisticated AI products in the world—something many of you probably use every day—is using this AI internally to improve their product. I think this points to a fundamental shift in how startups operate. Right now, the best teams aren't automating one or two internal functions; they're automating all of them. Often, they're tiny teams able to beat huge incumbents thanks to internal automation. Their leanness is their superpower. I've been calling these startups "20x Companies."

Several years ago, my friend Parker Conrad, founder of Rippling and Zenefits, coined the term "compound startup" to describe companies that build multiple integrated products in parallel rather than focusing narrowly on one thing.

Parker Conrad (CEO, Rippling): The theory of the compound software business is that there's this island of product-market fit that's kind of over the edge of the horizon line, that's sort of harder to get to. But if you can build multiple parallel applications at once, you can get there, and it actually ends up being a much more powerful type of product-market fit that's much harder to displace at that point.

Garry Tan: The 20x Company could be an evolution of Parker's idea but applied to internal automation. Instead of just narrowly automating a few things like writing code or handling customer support, 20x Companies build automations across all internal features: code, support, marketing, sales, hiring, QA, and more. This makes each of their employees orders of magnitude more powerful than they would be otherwise. It also allows them to postpone hiring additional sales and ops staff for much longer, keeping payroll down and culture from drifting.

The phrase "20x Company" was actually coined by the founders of Giga ML, which builds voice-based customer service agents for enterprise, to describe how they managed to close DoorDash as a customer, going up against incumbents that were literally 20x as large.

Esha Dinne (Co-founder, Giga): When we got DoorDash as a customer, we were approximately 4 to 5 engineers going against players who had 100x engineers. So, we kind of coined the term, like, "Hey, we are a 20x company because we're able to beat these much bigger players who are 20x us by having a better product and better numbers."

Garry Tan: Giga was able to close DoorDash and several other Fortune 500 companies as customers because of a powerful internal agent they call Atlas.

Esha Dinne: Atlas can basically do anything within the product which you want to do. So it can use browsers, it can edit the policies, it can write code, it can do anything within the product.

Garry Tan: Atlas dramatically expands the range of what each engineer can take on.

Esha Dinne: So, let's say before Atlas, every engineer can probably work on 4 to 5 problems at once because they're bottlenecked by all the boilerplate stuff they have to do for the customers. Now, with AI FTE taking care of all the boilerplate stuff, each engineer's scope is basically doubled or tripled because they don't need to work on the boilerplate code.

Garry Tan: But Atlas doesn't just accelerate Giga's engineers. It also acts as a full-time AI employee that works in tandem with a human FTE to service dozens of accounts.

Esha Dinne: Right now, we have only a single human FTE within the company. As hard as it is to believe, because we have companies like DoorDash using us—we are in pilots with multiple Fortune 500s—it's only been possible because we have Atlas. And this person can primarily focus on just the customer relationships, the asks by the customers, taking customer requests and turning them into feature requests and everything.

Garry Tan: Building an AI teammate is one approach. Another is to build an AI-integrated source of truth that gives employees instant context across your entire system. Legion Health, which is building an AI-native psychiatry network, is one example of how to do this. Legion built a custom internal interface for their care operations team that lets them pull patient history, scheduling availability, insurance codes, and a lot more.

Daniel Wilson (Co-founder, Legion Health): What we're showing you right now is an interface that a vast majority of our care operations team uses in their day-to-day work for anything that has not been yet automated. And this includes everything from digging into a particular patient or many patients' backgrounds, trying to understand where they're at in their journey. All of that is at a fingertips reach for every single member of our Care Ops.

Garry Tan: This single source of truth interface has let Legion keep its ops head count flat even as it's dramatically scaled revenue.

Arthur MacWaters (Co-founder, Legion Health): So, we've grown 4x in the past year, but we haven't hired a single net new person. We've been able to 4x the number of patients we're seeing. We have dozens of providers, but we have one clinical lead, we have one patient support person, and we have one billing person. And in a typical healthcare company, those are all departments. You know, those are call centers. Those are groups of people sitting around desks doing a ton of things manually.

Garry Tan: A third approach is actually to build custom agents for each employee depending on their workflow and preferences. Fazeshift, which is building agents to automate accounts receivable, took this approach.

Caitlin Leksana (Co-founder, Fazeshift): Fazeshift right now is a 12-person team, and we're going up against companies that have been around since 2006 that have hundreds of employees. The key to us as a 12-person team moving so fast is we bring AI into every process that is manual and try to automate as much as possible with AI agents.

Garry Tan: One way Fazeshift does this is by literally asking its employees to document the manual tasks they do and then building custom agents for them.

Caitlin Leksana: So, what we do is essentially say, "What do you spend your time doing throughout the day?" and we make them document that, and then we build quick AI agents.

Garry Tan: And this culture of relentless automation has let Fazeshift delay hiring for entire functions.

Caitlin Leksana: We've actually avoided hiring a design person at the company so far to date, and we're about a 12-person company, by just leveraging Magic Patterns and our engineering team uses that to build all front-end designs.

Garry Tan: These approaches aren't mutually exclusive. You can build AI teammates, a unified source of truth, and custom agents for each member of your team. The companies that do this are staying lean and setting record-high growth rates. This is the new way to build, and the startups that figure it out first are going to win.