Startups For the Rest of Us Episode 792 | Hot Take Tuesday: GPT-5 Struggles, the A.I. Bubble, and the Windsurf Debacle
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Sep 2, 2025 Join Einar Vollset, co-founder of TinySeed, and Tracy Osborn, Head of Product for TinySeed, as they discuss the implications of GPT-5 and whether it's a risk for SaaS founders or simply a stepping stone. They explore the troubling signs of an AI bubble and dissect the Windsurf debacle, where a $2.4B exit left early employees with nothing. The conversation also touches on why returning capital to investors is such an extraordinary feat and the challenges startups face in sharing success with their teams.
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Prove Your Fund With Real Returns
- Return capital to early investors to prove your thesis and credibility.
- Use real cash returns, not paper marks, to build trust and raise future funds.
Give Users Model Choice
- Let users choose between faster cheaper models and slower higher-quality models.
- Give paid users control to pick the model tier that fits their workflow and cost tolerance.
LLM Improvements Show Diminishing Returns
- GPT-5 improves capabilities but shows diminishing incremental gains versus prior versions.
- That suggests LLM progress may be approaching an asymptote rather than an imminent AGI leap.