It’s not just Nobel Laureates and tech leaders who signed the “We Must Act Now” pledge who can see how quickly AI is replacing jobs. In the first year I have run my own media consulting business, I have directly witnessed how quickly AI has replaced humans. In the few hours I spent waiting for an entry level worker to decide whether to take on a project, I used AI to finish the work myself. I advised a startup considering whether the technology it wanted to create could be eclipsed by AI before the startup finished fundraising. And I have chatted with AI startup founders who say they can’t keep up with the innovation of the behemoth AI companies who can create technology far faster than them. The loss of nearly 60% jobs and shakeout that groups like the IMF have predicted seems very real.

But this insecurity coming from the pace of innovation has also presented problems for investors trying to decide which startups to place their bets. Michael Sonnenfeldt , founder and chairman of Tiger 21 , sees it from both sides. He is a founder running his family office and searching for profitable investments. But AI is accelerating the pace of technology innovation so rapidly that he has had second thoughts about what to invest in. It’s okay if you’re one of the student startups I’ve written about in Forbes and you’re spending less than $500 on starting a business. But it’s not okay if you’ve poured millions of dollars into your dream.

Sonnenfeldt notes that there was one company he would have loved to invest in before the latest AI boom. A startup spent several years and several million dollars building an app that is the ultimate personal concierge. It’s something he thought was perfect for Tiger 21’s wealthy global clientele. He oversees a 2,000 member network living in 30 different countries with a combined net worth of $250 billion. But even though the founder had this incredible expertise creating this technology, Sonnenfeldt realized that rival companies could reproduce the same product for one-tenth of the cost.

“One in particular had spent millions of dollars over multiple years building a beautiful app. And the question is, ‘What is something like that worth when the technology has changed so rapidly that you could duplicate most if not all of what they've done in a small fraction of the time at a small fraction of the cost because whatever the effort was that was spent over the last five years, literally in the last six months?,” he asked. “The AI landscape has changed so radically that if you started from scratch, you could accomplish something that would be similar, but at a dramatically lower cost.”

But Sonnenfeldt did invest in a company that uses AI to help organize data in the last year because he thinks it’s keeping pace with how quickly technology is changing.

“This company has been started within the last year by an extraordinary team,” said Sonnenfeldt. “It has the ability to start fresh and have AI built into its very core. And so as the technology is changing, this company is in real time staying on top of it. And theoretically, if AI continues at the pace a year or two from now, it’ll again take half the time and half the money.”

Here are three solutions Sonnenfeldt offered to keep investors like him interested.

  1. Have a strong management team. Sonnenfeldt had read my previous Forbes article about how founders who had to spend $5 million 25 years ago to start a company can now do that for less than $500. But Sonnenfeldt warned that it's possible if you have a strong management team, which he would invest in. “ Obviously the $500 startup has to be managed by, I'll call it a million dollar brain, somebody who's really smart and knows what they're doing.”
  2. Have a barrier to entry: Sonnenfeldt also will invest in companies that have what he describes as “how big a customer moat do you have? In other words, could you hold onto those customers or if a competitor came along with the same technology, would they leave you immediately?” He understands that most technology startups face plenty of pressures when it comes to time and money. “But in order to be interested, we would also have to have some kind of competitive moat that would give us a chance to do something. It could be a patented idea, it could be a process, it could be a customer list.”
  3. Own a market: Sonnenfeldt believes very strongly that companies that may have spent too much money and time on technology that AI is replacing can still have plenty to offer because they know the market so well. “When you look at a startup, sometimes a first mover advantage can create an extraordinary tailwind for success and you can afford to overpay for a piece of technology if what it brings is a first mover advantage that will give you six months or a year or two years,” he said. The key is “your ability to dominate a marketplace or at least cement your position in a marketplace”

Sonnenfeldt noted that when you take all three elements together, founders have a much stronger chance at survival.

“Any of these startups rest not only on the technology but the management and the marketplace. Think of it as those three pieces. If you can command the marketplace and have extraordinary management, perhaps they can have the AI stay relevant and current.”