This Is The Next Industry AI Will Disrupt

By Y Combinator

Categories: VC, Startup

Summary

AI is poised to disrupt accounting and tax services by automating the core work that junior and mid-level accountants perform, eliminating the artificial middleman role firms have maintained for decades. The real value shift will come from AI's ability to read and substantiate documentation, not just perform arithmetic, fundamentally restructuring how professional services are delivered.

Key Takeaways

1. Accounting firms invested millions in RPA tools like Automation Anywhere that provided minimal value, while frontier AI models now outperform junior, mid-level, and some senior accounting staff at core tasks like R&D tax credit documentation.
2. The real competitive advantage in accounting automation isn't arithmetic (which is trivial) but rather reading, interpreting, and substantiating documentation from various sources like Jira tickets, emails, and employee records to prove compliance eligibility.
3. Accountants have artificially positioned themselves as essential middlemen in a workflow that could function directly between clients and technology, making them vulnerable to displacement by AI systems that can perform the same documentation and analysis work.
4. The timing is critical: frontier AI models have reached a capability threshold where they can now handle substantiation work across different industries (software, manufacturing, architecture), whereas previous RPA solutions could only automate narrow, repetitive tasks.
5. Founders with domain expertise (accounting + computer science) paired with early GPT-3 access had a 6-week window advantage starting January 2023 to recognize and build AI solutions before the Big Four could react or innovate internally.

Topics

• AI Disruption of Professional Services
• Accounting Automation and Tax Credits
• Documentation and Substantiation in Compliance
• RPA vs. Frontier AI Models
• Venture-Backed Alternative to Big Four

Transcript Excerpt

From my perspective, I understand why it's hard to imagine a post big four, a post accounting firm world. It is a foreign concept. Conversely, I don't actually think they've earned the right to maintain the reverence that they've they've been granted for all of these decades, centuries sometimes. [music] And so, if this keeps going the way that I think it's going to keep going, the way that I'm kind of betting the house that it's going to keep going is that's exactly what we're looking at, right...