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1Mby1M AI Investor Forum: Piyush Kharbanda, General Partner at Vertex Ventures (Part 4)

Posted on Thursday, May 15th 2025

Sramana Mitra: Deep domain knowledge is where a lot of those exit barriers come from, right?

Piyush Kharbanda: I’m not so sure yet. Deep domain knowledge is something that incumbents bring to the table in a lot deeper manner than startups do. You are right to some extent that domain knowledge is extremely relevant, but I don’t think that’s the unique defining factor.

Sramana Mitra: I think it depends on the application.

Piyush Kharbanda: Yes, also on the sector and stage.

Sramana Mitra: If there is domain specific insight that brings in a lot of integration into the surrounding technologies that the incumbents do not really have real insights that you’re doing something differently than what the existing market is capable of doing. That’s where the differentiation comes from and the moat comes from.

If it’s highly replaceable software, somebody is not doing it today, but that somebody who’s an incumbent with great distribution capabilities does it in six months, you’re basically gone.

Piyush Kharbanda: Yes, exactly. We have not seen, in the past innovation cycles, incumbents innovate at the pace at which we are seeing incumbents innovate today. That is a statement of fact that we now live by in how we evaluate startups.

Sramana Mitra: Yes. I have to agree with that. If you look at the enterprise software ecosystem, there are these big stacks already in there, and these guys can go in and stick agents into these stacks with deep integrations here and there and everywhere, across use cases, et cetera. If you’re not an incumbent, having that level of leverage is not going to be so easy.

Piyush Kharbanda: Absolutely. Having said that, that also comes with its own disadvantages. I’m not saying that I will not invest in any startups that are going to take on an incumbent because the incumbents themselves have their own problems. They need to refactor a bunch of culture and code and both go hand in hand, and that’s not going to be easy.

Sramana Mitra: Yes. It’s all built on old architecture. It’s on pre AI architecture.

Piyush Kharbanda: Let me give you a very simple example of call routing. Call routing is a technology that I did an internship in 2006 and that behemoth of a text track has been built over many, many years.

Now you could just put an agent to route calls without any of that logic built in. Now, would the incumbents that have millions of dollars of revenue coming on the back of that technology stack and that differentiation, would they be able to rip it out and replace it with a bunch of agents that are very well configured to work together?

I don’t know, but I would bet that many of them won’t be able to.

This segment is part 4 in the series : 1Mby1M AI Investor Forum: Piyush Kharbanda, General Partner at Vertex Ventures
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