Small Businesses Trust Their Software Vendors, So That's Where AI Gets Sold
About 20% of small businesses use AI, compared with about 85% at large companies, so Beacon adds it through vendors they already call.
Joys of Compounding · Nilam Ganenthiran: Building a Beacon in the Fog of AI - [Joys of Compounding, EP. 37]Nilam Ganenthiran, a former president of grocery delivery company Instacart who now runs Beacon, a company that buys small business software firms, argues that small businesses are slow to use artificial intelligence not because the tools are weak, but because owners do not trust the sellers.
His view grew out of playing with an early coding agent called Devin, which writes software from plain instructions. He heard the prediction that such tools would kill business software. After two decades selling to retailers in middle America, he thought the prediction missed how those businesses buy.
If building software gets cheaper, he reasoned, the hard part is not research and development. It is sales and marketing, the relationships and distribution that get a product used. So instead of building better AI and trying to sell it cold, Beacon would, as Ganenthiran put it, "buy the distribution and then build the technology" for customers who already trusted the seller.
It works because of who picks up the phone. When operators of campsites, youth sports leagues, concrete design shops, or private schools need help, calling a giant like Microsoft means waiting on hold. Calling the small software company that has handled reservations or registration for years means talking to someone they know. Ganenthiran says those customers are now asking their vendors to build more AI for them.
Use remains uneven. Data from financial technology company Ramp put AI adoption at about 20% among small and midsize businesses, compared with about 85% for large companies. Those numbers describe use, not the reason for it. He argues that for a big company AI is a boardroom project, but for a small operator it is survival, and that survival pressure makes owners want a tool from a vendor they trust.
That urgency is why Ganenthiran says Beacon wants to be "the innovation layer for the real economy." The old line between software and services fades, in this view, into just technology, whether a job is done mostly with code, partly with people, or entirely with code, so the owner can spend time on the business itself.
Questions people ask
What is vertical software?
Vertical software is software built for one type of business, like booking sites for campgrounds or registration systems for youth sports leagues. Unlike general tools like email or spreadsheets, it handles the specific jobs, rules, and language of that trade.
Why would a small business trust its software vendor more than Microsoft or a startup?
Ganenthiran's point is that owners would rather spend their scarce time doing what they are good at, like selling groceries, than building technology. If someone they trust can build the technology better for them, he asks, why would they not let that person handle it. That is why, in his account, calling a longtime vendor with a multi-decade relationship beats calling Microsoft and waiting on hold.
What is the Ramp data cited for the adoption gap?
Ramp is a corporate card and expense management company that sees spending across thousands of U.S. businesses. Because it can observe which companies pay for AI products, researchers use its anonymized data as a rough, real-time proxy for adoption.