there are more AI agencies right now than there were crypto agencies in 2021. and we all know how the crypto agencies ended up.

i run one. i'm telling you the model is dying.

not because AI is slowing down. because the way most agencies deliver AI is about to become worthless.

the wrapper problem

most AI agencies in 2025 and 2026 are wrappers. they take an existing tool, connect it to a client's workflow, add a prompt layer on top, and charge $5K-$15K for the setup.

the problem: the client doesn't need you for this anymore.

12 months ago, connecting a GPT model to a CRM required real engineering. today, tools like claude code, cursor, and no-code platforms make it possible for a smart operations person to build the same thing in a weekend.

the gap between "technical" and "non-technical" is closing fast. and when it closes, the agency sitting in the middle collecting fees for connecting APIs has no reason to exist.

here's the math

an AI agency charging $10K per project needs 10-15 clients per month to sustain a team of 4-5 people. the margins look good at first. 60-70% gross margin on flat-fee work.

but here's what happens:

client acquisition costs go up as more agencies enter the market.

project fees go down as the work gets easier to replicate.

delivery timelines shrink, which means you need more volume.

clients start doing it themselves after the first engagement.

you end up in a volume game with shrinking margins. the same trap every service business falls into.

i've watched this play out in real time. agencies launched 8 months ago are already struggling to differentiate. their pitches sound identical. their deliverables look the same. their pricing is a race to the bottom.

the agencies dying first

three types of AI agencies will not survive the next 18 months:

the prompt engineers. if your entire value prop is "we write better prompts," you're already dead. prompt quality matters less with every model upgrade. the floor keeps rising.

the automation assemblers. if you're connecting zapier to chatgpt and calling it an AI solution, the client's intern will be doing this by Q3. the tools are getting too easy. the skill gap you're monetizing is evaporating.

the strategy consultants who don't build. if you charge $20K for an "AI readiness assessment" and then hand off the build to a contractor, you're selling hot air. companies are done paying for slide decks. they want working systems.

what survives

the agencies still standing in 2028 won't look like agencies at all. they'll look like one of two things:

product companies. they took the systems they kept rebuilding for clients and turned them into standalone products. the best AI agencies right now are sitting on repeatable solutions they deploy across 10-20 clients. the smart ones will productize those solutions and sell them at scale. i wrote about this in how internal tools become standalone products.

venture studios. instead of charging fees, they partner with founders and take equity. they bring the technical expertise. the founder brings the domain knowledge and distribution. they build together with shared risk and shared upside.

i'm building the second one.

why i bet on the venture studio model

i could keep charging flat fees. the pipeline is there. but i've seen the ceiling.

a flat-fee agency at full capacity tops out at $1.5M-$3M in revenue with a team of 5-8 people. you're always one bad quarter away from a cash crunch. you're always trading hours for dollars even if you call them "project fees."

the venture studio model has a different math.

you build 8-10 companies over 3-4 years. you own meaningful equity in each one. if 2-3 of them hit $5M-$10M+ in revenue, your returns are multiples of what the agency would have generated.

and the work is better. you're not building someone else's vision on a deadline. you're building alongside a founder who picked you because they want a partner, not a vendor.

the risk is real. equity is worth zero until it isn't. some of these bets will fail. i've made peace with it because the alternative is running on the agency treadmill until the market commoditizes me out of it.

the 18-month prediction

by mid 2027, this is what i think happens:

60-70% of AI agencies launched in 2024-2025 will shut down or pivot.

the surviving agencies will have either productized their best solutions or shifted to equity-based models.

solo operators with AI tools will eat the low-end market ($3K-$10K projects).

the mid-market ($10K-$50K+ projects) will consolidate around studios with deep domain expertise and production track records.

"AI agency" as a category will feel as dated as "social media agency" does now.

the window for building a generic AI agency has already closed. what's opening is the window for building AI companies with founders who know their market.

what this means for you

if you run an AI agency: pick a vertical. go deep. either build a product or start taking equity. stop being a generalist wrapper shop.

if you're hiring an AI agency: ask them what they've built in your specific industry. ask for production examples, not demos. and ask yourself whether you want a vendor relationship or a partner relationship. the vendor will be replaceable within a year. the partner won't.

if you're a non-technical founder with a great idea: the best technical partners aren't posting "hire us for your AI project" on linkedin. they're picking founders to bet on. find one who wants to own the outcome with you.

the bubble is popping. what's left on the other side will be smaller, sharper, and more valuable than anything we've seen so far in the AI space.

i plan to be standing when it does.

we're an AI-native dev studio and venture partner for founders. we build AI systems for businesses and co-build AI companies with non-technical founders. if you're building something real, let's talk.