November 2024

How should entrepreneurs think about new business opportunities in AI?

Microsoft AI CEO Mustafa Suleyman told LinkedIn co-founder Reid Hoffman on an October episode of the podcast Masters of Scale that startups can find a niche in fine-tuning AI models with accurate examples. Fine-tuning means revising the models with examples so they perform better with fewer hallucinations.

“You have to show [an AI model] tens of thousands of examples of good behavior, and you have to fine-tune those into the model,” Suleyman said. “The good news is that tens of thousands of examples are very accessible to many niche domains or specific verticals. So that’s an edge and I think there’s plenty of room for startups in doing high-quality fine-tuning of a pre-trained model.”

^{Microsoft AI CEO Mustafa Suleyman. Photographer: Stefan Wermuth/Bloomberg via Getty Images}

Small AI Models Are the Future

Small AI models will be the future of AI, according to Suleyman.

“We’re going to sort of compress knowledge into smaller, cheaper models, which can live on a fridge magnet,” he said.

Related: Microsoft Is on Track to Hit a Major Milestone, the ‘Fastest Business in Our History,’ According to Its CEO

Training a large AI model currently takes about $100 million, with more advanced models expected to cost billions of dollars. The data that goes into training these models is controversial though, with many copyright lawsuits pending against companies like OpenAI.

Is AI Training Ethical?

In June, Suleyman answered the question of whether AI companies have taken the world’s intellectual property for their own gain. He stated then that almost all content on the Internet, except for news sites and publishers that have asked not to be crawled, is open to AI training.

“I think that with respect to content that is already on the open web, the social contract of that content since the ’90s has been that it is fair use,” he said at the time.

Related: Microsoft AI CEO Says Almost All Content on the Internet Is Fair Game for AI Training

This Side Hustle Spotlight Q&A features Justin Soleimani, 34, and Zach Dannett, 35. The duo met as classmates at Emory University and then went on to co-found Tumble. Their Los Angeles-based company sells machine-washable, spill-proof rugs and scaled from zero to $20 million in revenue within 2.5 years. Today, Tumble boasts a team of 10 and mid-eight-figure sales. Responses have been edited for length and clarity.

^{Image Credit: Courtesy of Tumble. Justin Soleimani, left, and Zach Dannett, right.}

What was your day job or primary occupation when you started Tumble as a side hustle?
JS: I was a consultant at Bain & Co., a global management consulting firm that provides strategic advice to Fortune 500 companies. I advised companies across multiple industries, including biotech, consumer goods, entertainment and private equity.

ZD: I worked at Noble House as head of merchandising. While I was there, Noble House grew to become one of the largest ecommerce home furnishing companies.

Related: They Met By Chance and Learned Their Grandparents Had Been Business Partners. It Led to a Side Hustle Surpassing $1 Million in Year 1 and 2 Multimillion-Dollar Brands.

When did you start Tumble, and where did you find the inspiration for it?
JS + ZD: We started developing Tumble in the fall of 2019, about 18 months before our official launch in April 2021. The idea grew from our frustrations with traditional rugs, which we found difficult to maintain, and the washable alternatives, which had their shortcomings. After speaking with dozens of customers and analyzing thousands of reviews, we identified common pain points like insufficient cushioning, curling corners and challenges in keeping the rugs flat. Although many washable rugs were marketed as convenient, the reality often involved heavy furniture rearrangement, turning a simple task into a hassle. To address this, we not only focused on making our rugs stain-resistant but also prioritized developing safer, non-toxic materials and earning environmental certifications that ensure they’re safe for children and pets.

^{Image Credit: Courtesy of Tumble}

How long did Tumble remain a side hustle before you took it full-time?
JS + ZD: We dedicated about a year to working long nights and weekends before launching our crowdfunding campaign. During that time, we visited various sewists in Los Angeles as part of our prototyping process, allowing us to test the product right here in the U.S. There were countless back-and-forths and iterations with suppliers in Asia before we reached our desired final product. We remember walking down the streets of LA on a hot summer day, carrying an 8×10′ rug draped over our shoulders to the sewist — definitely some hands-on, nitty-gritty work, but it was all worth it in the end.

Throughout that year, we focused on various critical aspects: securing manufacturers, refining prototypes, filing patents, conducting customer research, determining our product category and creating financial projections. We transitioned to full-time just six months before officially launching the company in April 2021.

Related: In Her Late 30s, She Pursued Another Creative Side Hustle — Then Turned It Into a Multimillion-Dollar Business

What were some of the key steps you took to launch and grow your business?
JS + ZD: To launch Tumble, we utilized crowdfunding as a key mechanism. This approach allowed us to gauge product-market fit, gather insights into our customers’ design and size preferences and raise capital to place larger orders with manufacturers. Our goal was to get our products into the hands of as many people as possible quickly, which helped us shorten the feedback loop — a big-bang approach.

We completely bootstrapped the business, investing our personal savings alongside the funds raised through crowdfunding for our initial purchase order. Our focus has always been on profitability; we have never raised outside capital, and the company remains fully owned by the founders and our employees.

Because we prioritized profitability and funded the business through cash flow, we ran the business with no full-time employees for the first two years, relying on independent contractors and agencies to meet our needs. We navigated the challenges posed by Covid, including supply chain disruptions and economic uncertainty, while maintaining profitability in a volatile environment.

After two years, we invested more in our team, bringing core capabilities in-house to build resilience. This has laid the foundation for the next phase of our growth, which includes expanding into new product categories, exploring additional sales channels and entering markets outside the U.S.

^{Image Credit: Courtesy of Tumble}

What were some of the biggest challenges you faced while building your business, and how did you navigate them?
JS: One of the most significant challenges we encountered was the impact of Covid on our supply chain. As a new company during this period, we faced constant changes in regulations affecting manufacturers and shipping. Prices soared, the economy was uncertain and ports were frequently closing. Navigating these disruptions as an emerging brand with limited resources was particularly challenging.

ZD: For the first two years, we couldn’t engage with our international suppliers, which added to the difficulty. We relied heavily on our international team and our suppliers to ensure that products shipped on time and met our quality standards. Strong communication and collaboration were crucial in overcoming these hurdles.

Related: Teen Brothers Started a Side Hustle on Facebook Marketplace That’s on Track for $1.2 Million This Year: ‘Quit My Job and Went All In’

What does growth and revenue look like for Tumble now?
JS + ZD: As a result of our success and profitability, Tumble has scaled to mid-eight figures in revenue, with a clear path to reaching nine figures—all achieved in under four years. We plan to expand into new product categories in 2025 and explore new sales channels and markets. Additionally, our team has grown to over 10 members in the U.S.

What do you enjoy most about running Tumble?
JS: Bringing new ideas and products into the world. It’s always exciting to brainstorm concepts and then see them come to life while observing customer feedback and usage daily. Reading reviews and comments makes the process incredibly rewarding. I also take great pride in building a team and creating a workplace where people feel proud and excited to be part of Tumble.

ZD: Running a business is full of ups and downs — the path to success is never linear. Facing adversity and new and changing landscapes is the reality of any business. And within these challenges lies the fun.

Every new market we enter and every new product we create presents its own challenges and an opportunity to dive deep, learn and create.

Almost five years in, as our business is rapidly changing, I can confidently say that this is the most exciting time for Tumble, and the future has never looked brighter.

^{Image Credit: Courtesy of Tumble}

What’s your advice for others hoping to start successful side hustles or full-time businesses of their own?
JS: My advice is to be willing to fully commit to an idea, even if you don’t have 100% certainty that it will succeed. You need a strong desire to make it happen. Choose something that resonates with you —something you’re willing to invest your time and energy in — and then take the leap. Be open to the idea evolving over time, but you must be ready to step off the ledge with your initial concept. It’s also crucial to choose the right moment to make that leap; for example, we worked on Tumble for a full year before going all in. By then, we had built confidence in our idea, and crowdfunding helped us gauge consumer interest early on. It’s about being thoughtful and strategic when taking that leap.

Related: These Sisters Started a Side Hustle After a ‘Light Bulb Moment’ Led to a ‘Versatile’ Product. Now It’s Done Over $45 Million in Sales.

ZD: Don’t fear “failure.” Many people see business as a binary outcome (success or failure). But in reality, some things work, and some things don’t. You need to approach setbacks as challenges and opportunities to improve. If you keep solving more problems than are created and learn every day from your failures and successes, you have a good chance of succeeding.

The disconnect that exists between consumer payment preferences and what small businesses offer is both surprising and consequential. According to recent data from Xero, nearly 90% of U.S. consumers prefer to pay by credit card, yet 30% of small businesses still do not accept card payments.

As competition heightens and customer loyalty becomes increasingly elusive, it’s more crucial than ever for small businesses to make decisions that align with their customer’s wants and needs. Adapting to consumer preferences not only fosters loyalty but also drives future growth. In order to do so effectively, small businesses must embrace the shift towards modern payment solutions to meet consumer expectations head-on.

How to develop a better understanding of shifting consumer preferences

Over the past decade, we’ve witnessed a significant shift in consumer behavior, largely driven by technological advancements and changing lifestyles. This has led to consumers having a diverse set of preferences for payment options; as such, businesses who offer multiple methods – such as debit and credit cards, mobile payments and Buy Now, Pay Later (BNPL) options – reach a wider range of customers and improve loyalty and satisfaction.

When consumers encounter barriers when shopping, such as the unavailability of their preferred payment methods, it’s more likely that they become frustrated and consider switching to a competitor. With so many other alternatives available, it’s even more imperative for businesses to offer a variety of payment options to cater to a wider range of customer needs — especially knowing just how valuable customer retention is in today’s landscape.

As an example, mobile payments have surged in popularity, particularly with younger generations: approximately 43% of Gen Z customers and 42% of Millennials regularly use digital wallets like Apple Pay or Google Pay, reflecting a preference toward convenience and ease in transactions. This trend underscores the need for businesses to adapt and embrace digital solutions in order to connect and engage with younger generations of consumers.

Research indicates that 21% of consumers would consider shopping at another business that accepts more payment options if their preferred payment method wasn’t available, highlighting a potential – and avoidable – loss for small business owners. As we’ve seen a growing trend towards digital and contactless payments, businesses that fail to adapt risk losing out to competitors who offer a more accommodating checkout experience.

From a business standpoint, digital payment systems also play a pivotal role in accelerating cash flow for small businesses. Recent data from Xero reveals that, on average, small businesses were paid 9.5 days late in the June quarter (2024). By incorporating “pay now” features on invoices and sending timely reminders to customers, digital payment systems can significantly reduce these delays and ensure that businesses receive their payments more promptly.

Incorporating diverse payment options can also create a more inclusive shopping experience, allowing customers with different financial situations to shop at your business. For example, BNPL options can attract younger customers who may not have the funds immediately but want to make a larger purchase. It’s also vital to adapt payment options based on differing customer touchpoints and interaction types. While customers interacting online often prefer digital payment methods, in-store shoppers may have different expectations and preferences. In fact, research shows that 74% of shoppers still use cash to make payments, highlighting the need for businesses to also cater to this subset of customers.

By offering both traditional and digital payment options, businesses can accommodate those who prefer cash and those who seek the speed and convenience of mobile wallets or contactless payments. This approach makes the shopping experience more seamless for every type of customer, whether they are tech-savvy or prefer more old-school methods.

What strategies can small businesses deploy to implement these changes?

As a small business owner, optimizing your payment system may seem like a daunting task, when in reality, it has the potential to be an exciting opportunity to elevate your business. By taking a strategic approach, you can ensure your payment methods align well with both your operational needs and customers’ preferences. Here are some practical steps to get started:

Assess current payment options

The first step is to evaluate what payment methods are currently in place. Ask yourself: What payment options are currently available for customers? Are customers satisfied with these, or are they requesting alternative methods such as contactless payments or BNPL services? Are there any common issues or complaints related to our current payment processes?

When evaluating these aspects, consider whether your existing options meet your business’s unique demands – such as payment speed, ease of integration and overall enhancements to the customer experience. By thoroughly assessing these areas, you’ll be able to reveal any gaps in service or opportunities for expansion. If you’re hesitant about adopting new payment technologies, keep in mind that these solutions have been designed with small businesses in mind and are built to seamlessly integrate with your existing systems.

Research and select suitable payment methods

Once you’ve assessed your current options, the next step is to explore different payment technologies that would fit your business operations. While traditional methods like debit and credit cards are widely accepted, it’s time to think beyond just the conventional offerings. Consider newer options such as mobile payments (e.g., Google Pay and Apple Pay) and BNPL services (e.g., Klarna and Afterpay), which have gained popularity in recent years due to their convenience and flexibility.

When conducting research into areas for expansion, consider which would best align with your business goals. Do you prioritize quick payments or minimal transaction fees? Take the time to explore your company’s data and analyze your target market’s preferences — understanding the spending habits of your customers can provide key insights. Keeping your customers’ needs at the forefront of your decision-making process, while also considering what’s feasible and best for your operations, will ensure a smoother transition and better outcomes.

Balancing costs and benefits of modern payment technologies

While adopting new payment technologies has many benefits, such as boosting customer satisfaction and enhancing cash flow, it’s equally important to consider the associated costs. Transaction fees, surcharges and implementation expenses should factor into your decision-making process, but don’t let these costs deter you off the bat; instead, weigh them against the clear benefits.

Instead of viewing upgrades as mere costs, consider how each new transaction through an upgraded payment option can actually drive your revenue. Each new transaction shouldn’t just be viewed as a sale, as it’s opening the door for increased growth and customer loyalty. If you miss out on transactions because your payment methods don’t meet your customer’s needs, it can impact your bottom line over time. Look at investing in new payment technologies not just as an expense but as an opportunity to capture more sales and grow your business.

An interesting example of a retailer is Walmart, which, despite not accepting Apple Pay, strategically promotes its own payment solution, Walmart Pay, to maintain control over data and enhance customer engagement. However, it would be interesting to see whether this strategy is worth the potential loss of customers who might not be willing to take the extra step to download and use Walmart Pay.

Investing in modern payment technology does more than just streamline transactions, it can enhance security, expedite payments and improve the overall customer experience. By streamlining payment processes, you free up valuable time and resources, allowing you to focus on other strategic areas of your business. A secure payment system not only can protect your business from fraud but can also build more trust with your customers.

Adapting to shifting consumer preferences is vital for small businesses looking to enhance customer experience through improved payment options. Customers don’t just want — they expect — seamless, flexible and secure payment options, and meeting these expectations is a key way to build trust and loyalty and set your business apart from competitors.

AI is an expensive business, costing upwards of $100 million simply to train a new model.

At Microsoft, though, a multi-billion dollar investment in AI appears to be paying off: CEO Satya Nadella said on a quarterly earnings call on Wednesday that Microsoft’s AI business “is on track to surpass an annual revenue run rate of $10 billion next quarter” and become “the fastest business in our history to reach this milestone.”

The annual revenue run rate projects revenue over a period of time based on previous revenue.

Related: Will It Take Nuclear Power to Sustain AI? Microsoft Is Betting on It.

Microsoft has invested about $14 billion into OpenAI, the company behind ChatGPT. It has also made several multi-billion dollar AI commitments, including a deal to reopen Three Mile Island, a nuclear power plant near Harrisburg, Pennsylvania.

^{Microsoft CEO Satya Nadella. Photo by Ethan Miller/Getty Images}

Nadella also pointed out on the call, which went over earnings for the first quarter of fiscal year 2025, that Microsoft Cloud revenue was up 22% year over year, growing to $38.9 billion for the quarter ending September 30. Revenue overall increased 16% to $65.6 billion.

At Microsoft, “AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process,” Nadella said.

Though Microsoft’s earnings were better than expected, the company’s shares fell by more than 5% on Thursday because its predicted cloud revenue growth was less than expected.

Related: These CEOs Have the Biggest Pay Packages in the U.S., According to a New Report

Nadella was well-compensated for leading Microsoft: He received a pay increase of over $30 million for the fiscal year ending June 30, resulting in an overall pay of $79.1 million compared to $48.5 million a year prior.

Nadella’s compensation would have been $5.5 million higher, but he asked for it to be lower following a series of cybersecurity breaches.

Meanwhile, Microsoft went through layoffs affecting nearly 1,900 people in its gaming division in January.

Microsoft now has about 228,000 employees globally.

Related: Microsoft Strikes Back at Salesforce, Announces New AI Agents That Can Take Over Finance, Sales, and Service Tasks