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WHEN THE MODELS GET BETTER, YOUR TAM SHOULD GO UP

The first thing every AI native business needs to ensure is that their TAM goes up when models get better. Most AI businesses operate in the gap between what models can do and what the customer needs. Every model release eats a layer of that, and the market shrinks with it. If a better model is bad news for your business, you're arbitraging a capability gap on a timer.

WE'RE GOING TO NEED DEFAULT HARD BUDGET CAPS ON PRETTY MUCH EVERYTHING

The world is going to need more default hard budget caps in the coming months and years. Agents greatly reduce the friction of spinning up code, but that costs money. Nobody wants to wake up to an over-budget bill generated by an agent overnight. Businesses don't want applications to throw errors because some budget was exceeded, but most will likely prefer errors to a surprise $10,000+ bill. Hard budget caps should be the default - people who want to live dangerously should be able to do that, but it needs to be on an opt-in basis.

SALESFORCE, ATLASSIAN, AND HUBSPOT ARE STARTING TO CHARGE FOR AGENT API ACCESS

SaaStr received an estimate of up to $240,000 a year for agent API access that had previously come with its software subscriptions. Its revenue agent makes 35,000 to 40,000 API calls a day across its tools. The agent proposed copying the data into a $5 Postgres database to reduce those calls, though SaaStr hasn't built that workaround yet. Salesforce is introducing access charges, and Atlassian already charges. HubSpot's fees appear limited to its own agents so far, with third-party agents still uncharged in SaaStr's account.

PREDICTION: THE NEXT MASSIVE GOOGLE UPDATE IS AROUND THE CORNER

Google updates its documentation with clues before launching major updates. The company rewrote its guidance on AI content this week. It is now 'critical' that sites manually fact-check and review all AI-generated content before publishing. Fake authors are now categorized as a form of deception. Google has now announced what it considers low quality - now is the time to fix any issues before the update officially rolls out.

IS BUYING YOUR PRODUCT OPTIONAL FOR THE CUSTOMERS YOU ARE TARGETING?

Your best customer loves the product. Why won't another company just like them buy it? Having the same problem doesn't mean having the same reason to act now. Take AI search. A marketer might urgently need a dashboard because their boss wants an answer about visibility, while feeling little pressure to buy a tool that actually improves it. Look back at what was happening when customers bought. What could they no longer postpone, and why couldn't their existing tools or another available option solve it?

WHEN ARE NEGATIVE GROSS MARGINS ACCEPTABLE FOR AN AI STARTUP?

Your AI product gets better, customers use it more, and each account becomes less profitable. Harvey reportedly hit negative 50% gross margins in June as usage grew under flat seat pricing. Subsidizing usage can help acquire customers or learn what they'll pay for, but it needs a way out. The comparison with Legora lays out three options. Charge for usage, make each request cheaper, or cap what's included. One proposed test is whether customers would stay when the product keeps 40 cents of each dollar after covering the cost of serving them.

SUPABASE SELECT 2026 RECAP

Supabase now works code-first. Developers can build anything because the agent works in the same code they do. The agent can find problems, and the developer decides what to merge, so they can operate with confidence. Apps can scale without limits as the same Postgres carries it from prototype to petabyte.

CLOUDFLARE BIRTHDAY WEEK 2026

Cloudflare made a series of announcements during its birthday week last week. This page puts them all in one place. The entries are ordered by announcement day. The announcements include new releases, security tools, monetization programs, and agent harnesses.

THE COGNITION PLAYBOOK: FROM DEBUNKED DEMO TO $1B ARR

Cognition crossed $1 billion in annualized revenue on September 25. It was at $1 million just 24 months earlier. The company had no customers and no revenue when its launch video went viral in March 2024. Since then, the company has raised three rounds in the last twelve months, the last one at $48 billion, and bought Windsurf, a company five times its size. The company's own agent now writes about 90% of its code.

EXITED FOUNDERS IN SAN FRANCISCO ARE RENTING A $4 MILLION MIDLIFE HACKER HOUSE

One founder sold his company in 2021 and now flies from Austin to San Francisco every other week to be near the AI scene. He's staying at Vibe House SF, a $4 million house aimed at founders who've already had an exit. Stays last up to two weeks, and the house hosts events three times a week. Alongside the demos and dinners are $140 grounding sheets, quartz singing bowls, and a 3,300-word manifesto.

A FOUNDER GOT TO $120K IN REVENUE BY DMING PEOPLE WHO HAD ALREADY COMPLAINED ABOUT THE PROBLEM

A founder reporting $120K ARR says his first 100 users came from direct conversations.

YOUR COUNTRY NEEDS BUILDERS

We underestimate how much can change when people are given the means to build useful things.

A PODCAST DATA STARTUP WAS BOUGHT BY THE CUSTOMER ALREADY RUNNING ON ITS TECHNOLOGY

Audiohook bought Podscan after building its own product on Podscan's podcast data.

FINAL COMPANIES: THE END STATE OF AI AGENTS

AI agents could become the primary gateway to commerce and online activity, controlling which businesses receive traffic and spending.

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FINTECH IS DEAD

Fintech has been brutally effective at stripping costs out of traditional banking. It has made entire customer segments profitable for the first time. However, cloud and mobile are no longer the driving forces of disruption in financial services - intelligence tokens and value tokens are. The first trillion-dollar finance company will be an AI-first, token-first company.

STATE OF MARKETS II

Andreessen Horowitz's "State of Markets II" report highlights tech's dominance in capital markets, contributing 76% of the SP500's earnings growth in 2026. A pivot from software to hardware sees high demand for AI-driven semiconductors, funded by tech giants' profits and debt. Despite fears of GPU obsolescence, demand-driven pricing remains strong, with SaaS companies facing a revaluation as they shift from growth to profitability.

WRITING IS ESSENTIAL TO HOW @MERCURY COMMUNICATES AS A 1,300-PERSON REMOTE-FIRST COMPANY

Writing helps you process ideas, analyze problems, and explore solutions. Good writing is concise - reading should be easy. AI can churn out a lot of content, but it isn't a good writer. The technology should be used instead to critique, condense, shape initial drafts, and summarize complex information.

HIRING BREAKPOINTS

Hiring decisions should consider that incremental hires are not linearly useful and can even be detrimental. Key team size breakpoints, such as 0-1 and 7-10 employees, significantly impact hiring effectiveness. Crossing the Dunbar number (~150 employees) necessitates robust coordination structures, as productivity per hire generally decreases beyond this point.

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AMAZON AURORA POSTGRESQL NOW SUPPORTS DIRECT QUERYING OF APACHE ICEBERG AND PARQUET DATA IN YOUR DATA LAKE

DuckDB is now embedded directly within Amazon Aurora PostgreSQL. Users can now directly query operational data together with data stored in their data lakes in Apache Iceberg and Apache Parquet formats using existing PostgreSQL applications and tools. They can power real-time dashboards, enrich transactions with historical context, and build AI agents that reason over both live and archived data through a single, familiar interface. They can also use Aurora PostgreSQL to query data from data lakes managed in Iceberg REST Catalog (IRC)-compatible catalogs.

FIRECRAWL AGENT

Firecrawl Agent gathers data whenever it lives on the web. It searches, navigates, and gathers data from a wide range of websites, finding data in hard-to-reach places and uncovering information in ways no other API can. The agent can accomplish in a few minutes what would take a human many hours. It handles end-to-end data collection without scripts or manual work.

CLOUDFLARE OS: YOUR COMPANY'S AGENT WORKSPACE, MANAGED FOR YOU

Cloudflare has opened up the waitlist for fully managed Cloudflare OS deployments. Cloudflare OS gives everyone in an organization an agent workspace that knows how the company works and connects to its data and systems. Teams can ask agents to handle work and build tools for them. Cloudflare OS is open source, so businesses can customize it around how their company works. With the fully managed option, teams decide who can access Cloudflare OS, which organization skills and context are available, and which systems it can reach, and Cloudflare will handle the rest.

“THIS IS A PRETTY FANCY DINNER. THAT PROBABLY MEANS I'M OVERPAYING.” A DREAMFORCE LESSON FROM A TOP 5 CUSTOMER

A Groupon executive commented on a fancy vendor dinner, suggesting it signaled overpayment, leading to strategic adjustments. Companies must ensure customers perceive value continuously, not just at renewal, by avoiding mediocre support and unnecessary upcharges and focusing on customer success. Especially crucial in AI, value perception affects fast audits and contract renewals.

NOW IS NOT THE TIME TO INCREASE YOUR BURN RATE

Founders misinterpret the current VC market as abundant in capital, leading to increased burn rates without securing additional funding. Investors increasingly prioritize fast-growing startups, leaving many others, including those needing bridge rounds, unable to secure additional capital. To avoid running out of runway, founders must engage in open dialogue with investors and heed their guidance on funding realities.

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$20M FROM ACCEL & INDEX TO REPLACE SLACK — WITH NO CO-FOUNDER

Sara Du's new startup, Ando, secured $20M in funding from Accel and Index Ventures to create a messaging platform integrating AI agents as coworkers.

WHO'S ON BOTH SIDES? THE INVESTORS BACKING RIVAL CODING AGENTS

Investors like Vinod Khosla and Keith Rabois back both Factory and Cognition amid a public dispute involving board advisers.

AI SEARCH IS NOW GENERALLY AVAILABLE

Cloudflare's AI Search combines Workers AI, Vectorize, R2, and Browser Run into a fully managed index and retrieval pipeline.

PETER THIEL, RENÉ GIRARD, AND ANTI-MIMETIC INVESTING

René Girard's theory of mimetic desire explains how tightly networked communities converge on the same goals, creating rivalry and herd behavior.

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DEPLOYMENT GAP

Robotics is finally having a moment. Models are getting better, costs are coming down, and robots are logging real hours in customer facilities. However, full deployment will still take some time - even companies that publicly claim they have deployed robots often do not have them working on actual production lines. Until the technology improves, the industry will need patient capital.

THE GREAT AI CAPITAL MISALLOCATION

The flood of capital into AI infrastructure has left many promising startups underfunded, with investors chasing companies that can absorb huge sums quickly. AI's rapid growth benchmarks and the belief in a winner-take-all scenario drive this trend, yet hinder more traditional but solidly growing tech firms. As capital focuses on AI infrastructure, there's potential in identifying application companies ready to leverage cheaper AI tech for broader market success.

WHAT TYPESAFE GOT RIGHT WITH THE JEV LAUNCH

TypeSafe's Jev launch achieved rapid adoption among Vercel's paid AI teams due to its clear value and easy integration into existing workflows. A compelling demo showcased Jev's speed in making bounded decisions, outperforming competitors and highlighting its utility. The product's early success stemmed from allowing users to quickly demonstrate and share tangible outcomes, supported by strategic distribution to influential tech figures.

THE GUERRILLA HIRING PLAYBOOK

Leaders face challenges hiring talent in the AI-focused market, where usual tactics are less effective. Guerrilla hiring involves frontier, potential-based, and asymmetric hiring to attract trajectory-changing talent without relying on brand power. Utilizing "talent magnets" as domino hires can jumpstart recruitment by attracting follow-on candidates who define and drive expected roles and career paths.

MARKET TO THE MIDDLE

Ever read a thread about your product and wondered if these people are even your customers? Tracksuit's CEO argues that online discussion overrepresents enthusiastic fans and angry critics, while ordinary buyers rarely post at all. AI recommendations can pick up those same opinions, making a vocal minority seem more representative than it is. Tracksuit compares consumer surveys with AI responses to see where perceptions differ. Before changing your positioning around a loud complaint, find out whether the customers who aren't posting share it.

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OPENAI DEVDAY 2026

OpenAI introduced on DevDay new models, tools, and agents to help developers build faster, take on more ambitious projects, and bring their products to more people. The company revealed new agents that can take on ongoing responsibilities and new ways for people and AI to work together. It also expanded its commitment to an open ecosystem by opening up ChatGPT as a shared surface where humans and agents can collaborate and where developers can directly launch new native experiences. There is now a new Pro 500 plan that offers 25 times the ChatGPT Plus allowance and includes access to Ultrafast.

META LAUNCHES MUSE FOR SMALL BUSINESS WITH NEW CONNECTORS

Muse for Small Business enhances Muse with skills and connectors designed to help people operate and grow their companies. Users can give Muse a goal, then connect the services holding the information needed to pursue it. Muse can draw on analytics from Meta's apps and a broad set of business tools. The agent will not publish content, send messages, or spend money unless authorized.

MODELING SOFTWARE'S BUSINESS IMPACT

There's no guaranteed relationship between software cost and value. While cost improvements are typically marginal and difficult, value improvements are game-changing. AI can produce a lot of work, but that doesn't mean that customers can absorb it. Businesses need to treat customer attention as the scarce resource it is and only ship the things that are truly valuable.