Agent networks
How agents unlock the next generation of NFX
I’m a deep believer that marketplaces and NFX-driven businesses will survive the rise of agents; even if rote indexing gets commoditized, multiplayer coordination and the fundamental physics of network effects are highly durable.
As the difficulty to produce/create software goes down and the lack of true moats in most software companies becomes more apparent, the unique value of network effects as a truly defensible position will reprice.
Chris Dixon gave us “come for the tool, stay for the network.” James Currier gave us “market networks.” I want to add a third: agent networks. Self-driving software that starts useful to one user, then backflips into multiplayer coordination as those users’ agents start transacting with each other. Build the tool, acquire the network.
AI will actively create more and new opportunities to build network effects, even if the playbook and form factor diverge wildly from web 2.0 marketplaces.
Platform shifts and primitives
Historically, marketplace and NFX businesses were built on a set of primitives: payments, identity, messaging, and risk/compliance. With each new platform shift (internet, then mobile) these businesses have added/relied on new primitives as the base metal powering the network, beneath the interface and UI.
The first marketplace businesses (think eBay) were built on a hugely important and newly possible set of primitives enabled by the internet as a platform. Payments and messaging made those web 1.0 businesses work. Finding, talking to, and paying strangers was a hugely valuable new capability made possible by the internet and powered a new trillion dollar economy of online commerce.
The next platform shift (mobile) spawned a wider array of 2- and 3-sided businesses (Uber, Airbnb, Doordash, targeted ads, etc.) that added identity and risk/compliance, allowing NFX businesses to extend deeper into the messy real world of people and services. These (mostly) locally constrained services companies were brutally expensive to build because of the requirements for density and the cold start problem BUT they could address bigger markets.
For a brief time, it seemed like “market networks” would be the next evolution here: companies like AngelList and HoneyBook would start as software companies to attract one side of the market and then power connectivity to create NFX and lock-in with the other. But there was no meaningful platform shift powering these businesses and no new primitives; the single player utility wasn’t high enough or new enough at the start. While they didn’t fail (those companies still exist after all), there are no IMPORTANT companies to emerge from this hypothesis.
Now with the AI platform shift, context will be the fifth primitive for marketplaces and agent-networks are the emergent NFX paradigm. Even if it’s self-driving and has no conventional interface it functions on the same basic metal.
With each new platform shift, NFX businesses tend to monetize at a higher rate. As you add new primitives, you creates new monetization pathways, which ultimately drives take rates and viable category sizes. Context as a primitive powers the addition of a SaaS-like business model, which obviously opens up new sizes of categories.
Agent networks
Agents finally make the single-player tool valuable enough to stand on its own. You can build in sequence and grow revenue while in pure single-player mode because the utility of agents is so high. With obvious, out of the box utility you get cheaper acquisition and avoid the cold start (kind of one thing), and the shape of the network changes.
The user’s agent is a way to acquire context and serve them in single-player mode. My agent does stuff for me, part of which might be talking to you, which sets up the company to sell an agent to you. Then our agents talk together / to each other (you know, business).
There are a handful of companies cropping up and starting to run some version of this idea already.
Phoebe does this in home care. Scheduler agent for agencies, talent agent for caregivers, family agent for clients. Three sides, one network. More in the announcement post.
Ando does this in restaurant staffing. Forecasting and scheduling for operators, Ando Passport for workers (a verified identity that compounds across shifts and is portable across employers).
Hero and Nas.com do this for sellers. Take a photo, the agent identifies the item, prices it, writes the listing, posts it. Acquire sellers now, run the marketplace later.
TruckSmarter does this in freight. Owner-operator truckers pay for an agent that aggregates loads, handles scheduling and paperwork. The talent agent is the wedge into a network nobody has been able to consolidate. Notably TruckSmarter is pivoted into this; it’s not a new company.
Across these verticals (and many more) the pattern is/will be the same: Pay a single-player agent to absorb grunt work on the side of the market that is hardest to acquire. The network follows.
Self-driving networks have to drive themselves, after all.
Where to build
The pattern selects for different TAM and acquisition cost profiles than web 2.0 marketplaces. What to look for:
Coordination and memory is the grunt work on the acquirable side. Middle-of-the-curve tasks. Not physical, not skilled, not requiring personal agency to get started.
Buying propensity (not P2P). It’s too hard get normal people to pay for a single-player agent (normal people don’t buy lots of software for themselves). B2B or B2C where one side can absorb a SaaS-like agent, or P2P close to a transaction where one side has prosumer-level coordination load (Hero, Nas.com).
Sneaky big TAMs: context makes the TAM’s bigger but you still can’t do it anywhere that’s micro, or you at least have to have a point of view on long-term category size.
The two places it doesn’t work:
Networkable but not agent-acquirable. You still can’t do Uber from scratch. There’s no market creation opportunity if you need existing people to benefit from an agent, and there’s no good case for single-player Uber as an AI agent that a driver would have paid for. Riders obviously aren’t gonna pay for a ride booking agent.
Agent-acquirable but not networkable. Vertical AI that works like SaaS. Real single-player utility but no multiplayer layer to lean on. If external coordination can’t/won’t be on the roadmap, it obviously can’t work in multiplayer mode.
Conclusion
I’m not convinced lots of standalone, non-NFX driven agents will have a lot of long term value, at least not unless they can move past SaaS-like experiences, business models, and GTMs. Switching is easy and you have to sprint to stay in the same place because of model improvements.
Agent networks are different. The NFX drives utility you can’t recreate in single-player mode even if you perfectly exfiltrate data and infra. The data and infra make the system better, of course. So it’s networks, then data, then infra, in order of importance. The infra is the least important because it’s the most replicable; anyone can build good software on their own but you can’t just produce the data, and even if you could it would be useless without a network.
The graph is the moat and context is the new primitive driving a business model shift for marketplaces.
Read More
Life on Autopilot: on on what agents can, can't, and shouldn’t do
Don’t call it a moat: on why software moats mostly aren't
The phone company always wins: on the durability and appeal of NFX-business
Slop Con
On Saturday, May 2nd, we’re hosting NYC Slopcon, a hackathon for product engineers, vibe coders, commercially minded engineers, technically minded sales people, high velocity operators, etc..
We are convinced that the world is reorganizing around four archetypes and ways of working: slop cannons (non derogatory), SREs, adults, and hot people.
The best AI native companies are increasingly recruiting commercially minded engineers regardless of the role. They explicitly want people who are comfortable using tools AND thinking about product AND thinking about customers. The salespeople are shipping (at least internal tools and automations for themselves) and the engineers are relentlessly focused on customer value.
The highest performing companies will have ‘product engineers’ and slop cannons in every role (product/eng, sales, ops, talent, finance, CX, marketing, etc); it is a multi-hyphenate skill set crucial to accelerate each area of the business.
We’ll have prizes and credits from OpenAI, Vercel, Pangram, and Memelord. Join us. Slop em up.
This is a really important idea. I hadn't thought of it this way before. Once you do though, you see opportunities everywhere.