Software 3.0 Framework

Software 3.0 represents a new paradigm where developers leverage foundation models rather than building everything from scratch. Here's the key framework explained by Sarah Guo.

Evolution of Software Development

• Software 1.0: Traditional hand-written software
• Software 2.0: Machine learning with dataset labeling and training
• Software 3.0: Manipulating foundation models with minimal training

Key Characteristics of Software 3.0

• Uses foundation models that have extensive capabilities out of the box
• Doesn't require training from scratch
• Focuses on guidance and reinforcement rather than building
• Requires business-specific information integration
• Emphasizes last-mile implementation over core model development

Business Opportunities

• Wedge opportunities using existing models

  • Copy editing and content generation
  • AI companionship apps
  • Video generation
  • Headshot creation
  • Voice automation

• Revenue potential

  • Quick path to 7-figure revenue
  • Low marketing spend needed
  • Viral potential due to novel capabilities
  • Can start with small team (1-2 people)

Success Requirements

• Distribution and marketing skills
• Understanding of specific niches
• Ability to make products deeper over time
• Focus on expanding scope for customers
• Traditional moats still matter for scaling

Market Dynamics

• Foundation models reduce barrier to entry
• Similar to dropshipping era of internet business
• Opportunity for entrepreneurs without deep AI expertise
• Focus on commercial applications rather than research
• Need to build beyond initial novelty for long-term success

Challenges and Considerations

• Need to develop traditional competitive advantages
• Must avoid becoming a "treadmill business"
• Requires continuous product development
• Important to find sustainable differentiation
• Need to build beyond initial arbitrage opportunity