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Business Insider
a day ago
- Business
- Business Insider
As AI coding services face a reckoning, Bolt tries to go beyond building
AI coding startups are facing a reckoning, with questions about pricing models and customer churn. Eric Simons, CEO of startup StackBlitz, has been working on potential solutions. StackBlitz runs a popular AI coding service called and on Thursday the startup rolled out new features and an updated subscription aimed at keeping customers engaged on its platform for longer, Business Insider learned exclusively. In the crowded AI coding market, many startups rely on reselling AI inference. They pay for access to AI models from frontier labs and Big Tech providers, then charge customers for their bespoke coding services — hoping to make a profit on the difference. However, once users finish building a project, there's less reason to stick around. That increases the chance that some customers cancel their subscriptions. Simons is seeing churn rates across the AI coding market running at 20% to 40%. He declined to say what Bolt's churn rate is; however, he noted that Wix, a more traditional website-building service, has much lower churn rates. That's because Wix generates the bulk of its recurring revenue from hosting and similar stickier offerings, rather than one-off project creation. "This is the problem across all these companies right now. The churn rate for everyone is really high," Simons said. "You have to build a retentive business." Love Business Insider? Log into Google and make us a preferred source. Adding more valuable, stickier services on top of these models is the goal now, and Simons is repositioning Bolt with a new mantra, "Build Without Boundaries." "The challenge here is that if your business is purely AI, reselling AI inference, your business is very fragile and vulnerable, because the winds can shift violently," Simons added. One solution is to offer a broader array of tools that bring more users into your ecosystem. This is why Bolt launched a subscription overhaul on Thursday aimed at making the service more of an end-to-end platform, not just a building tool. Pricing will remain the same for most tiers, with only the entry-level plan rising from $20 to $25 a month. Every plan will now include hosting, domains, databases, serverless functions, authentication, SEO optimization, Stripe-powered payments, and analytics for an unlimited number of projects. Bolt is partnering with companies such as infrastructure leader Netlify and database provider Supabase to provide the same scale and reliability used by major tech companies, but wrapped into one subscription. The idea is to keep users in the Bolt ecosystem well past the initial creation phase. Instead of exporting their projects to another host or backend service, users can launch, run, and scale them without leaving the Bolt platform. Pay-as-you-go pricing will kick in only for unusually high traffic, with user-set caps to avoid surprise bills, Simons told Business Insider. Simons sees this approach resonating with two main audiences: "prosumers," solo builders and entrepreneurs launching new products; and B2B product teams that use Bolt for rapid prototyping and internal tools. For the latter, staying in Bolt isn't just convenient; it embeds the platform into their ongoing workflow, making it harder to leave. By going "beyond building" and integrating the entire product lifecycle into one subscription, Simons hopes to shift Bolt from being a one-off AI tool to an essential part of its customers' day-to-day operations. Indeed, other AI coding services, Replit and Lovable, offering extra features now too, such as hosting. In an industry where the winds can change fast, the bet is that offering a complete, durable ecosystem is the only way to scale sustainably.
Business Insider
3 days ago
- Business
- Business Insider
'Inference whales' are eating into AI coding startups' business model
The AI coding sector has a problem. Heavy users of AI coding services have been racking up huge costs, forcing some leading startups to overhaul their pricing structures and offerings to avoid big losses. "Inference whales," as some in the business call these customers, are making industry insiders question whether AI products that are just "reselling inference" can survive long-term. Inference refers to how AI models are run. Newer reasoning models break user requests down into multiple steps, which increases inference costs. When applied to AI coding services, where developers set automated agents to longer-term tasks, expenses can soar quickly. This is a problem for AI coding services because they're often offered through monthly subscription plans. Many plans allow unlimited use for a fixed monthly fee, and a few users have taken advantage by bombarding the services with huge projects. These startups must still pay for the underlying AI models, so they're getting squeezed between a relatively fixed revenue stream and rapidly rising backend costs. "If you're purely reselling AI inference, your business could be very fragile and vulnerable, because the winds can shift violently," said Eric Simons, CEO of StackBlitz, and startup that offers a popular AI coding service called Claude Code whales Anthropic offered its popular Claude Code service through a $200 a month unlimited plan earlier this year. Some subscribers went berserk, using thousands of dollars' worth of AI inference over a few weeks or months. Someone even built a website to rank these AI coding whales. The Claude Code Leaderboard lists one developer at the top who's burned through almost 11 billion tokens. Tokens are how AI models break queries down into digestible data chunks. Industry pricing is based on how many tokens are processed. That top-ranked developer's token usage costs almost $35,000, according to this leaderboard. That compares to the $200 a month he's been charged. Even if that's over a whole year, Anthropic would be getting about $2,400, while incurring much higher inference costs. Anthropic is changing its pricing That's clearly unsustainable, so Anthropic plans to change its pricing. The $200 a month plan will stay, but the startup will introduce weekly rate limits, starting August 28. If users blow through these new weekly rate limits, they will have to buy additional capacity. "We've identified extreme usage by a small number of customers that impacts capacity for our broader community," an Anthropic spokesperson told Business Insider. The startup said it's also seen "policy violations," such as account sharing and reselling access. "We're committed to supporting advanced use cases long-term, but need to ensure consistent performance for all developers in the meantime," the Anthropic spokesperson added. A Swedish whale I tracked down one of the whales near the top of the Claude Code Leaderboard. Albert Örwall, a developer based in Sweden, said he's been using the $200 a month Claude Code subscription to build his own vibe-coding platform, along with some open-source agentic tools. "I was probably running 3 to 4 fairly long-running tasks in parallel constantly while I was working, and that's when it really took off," he said of his Claude Code usage. Even excluding these big projects, Örwall said his regular workflow in Claude Code likely racks up inference costs of $500 per day, under a subscription that costs only $200 a month. "So I'm guessing my workflow might not be sustainable for Anthropic," he added. Cursor responded, too When Anthropic's new pricing kicks in, Örwall said he'll keep the $200 a month subscription for a while to get a feel for what the weekly limits actually mean for his budget. "I'll avoid paying anything beyond the $200 subscription," he said, noting that he can change how he writes code and develops projects to avoid breaching the new rate limits. "The reason I originally switched from Cursor to Claude Code was because usage-based pricing became too expensive in Cursor," Örwall added. Cursor is another popular AI coding service, which often uses Anthropic's AI models as the underlying intelligence powering its product. Cursor recently switched its $20 a month Pro plan from unlimited requests to a tiered system with usage-based pricing for "fast" requests, meaning users are charged extra for exceeding a certain limit. This change, coupled with a lack of clear communication, caused confusion and frustration among some users who expected unlimited usage. Cursor announced the initial change in mid-June. Then it updated with more details about 2 weeks later, and then again in early July. "New models can spend more tokens per request on longer-horizon tasks," the startup wrote in a blog post, apologizing for surprising users with unexpected new bills. "Though most users' costs have stayed fairly constant, the hardest requests cost an order of magnitude more than simple ones." Inference costs aren't falling The assumption across the industry has been that inference costs will drop dramatically, making these AI coding services more financially viable. However, in practice, this hasn't happened thus far. Instead, when a new top AI model comes out, all the AI coding services integrate it — along with its higher prices. "This is the first faulty pillar of the 'costs will drop' strategy," Ethan Ding, CEO of startup TextQL, wrote in a recent blog. "Demand exists for 'the best language model,' period. And the best model always costs about the same, because that's what the edge of inference costs today." Developers and other AI users usually want the best, not last month's leading intelligence. "Nobody opens Claude and thinks, 'you know what? let me use the shitty version to save my boss some money.' We're cognitively greedy creatures," Ding wrote. "We want the best brain we can get." Even when inference costs do fall, the rise of agentic AI workflows means that developers set up longer, automated projects that generate a lot more tokens. If a project uses 100 million tokens, rather than 1 million, the initiative's cost remains high, even if per-token prices may have fallen. "A $20/month subscription cannot even support a user making a single $1 deep research run a day," Ding said. "But that's exactly what we're racing toward. Every improvement in model capability is an improvement in how much compute they can meaningfully consume." "There's no way to offer unlimited usage in this new world under any subscription model," he added. "The math has fundamentally broken."
Business Insider
3 days ago
- Business
- Business Insider
'Inference whales' are breaching AI coding startup business models
The AI coding sector has a problem. Heavy users of AI coding services have been racking up huge costs, forcing some leading startups to overhaul their pricing structures and offerings to avoid big losses. "Inference whales," as some in the business call these customers, are making industry insiders question whether AI products that are just "reselling inference" can survive long-term. Inference refers to how AI models are run. Newer reasoning models break user requests down into multiple steps, which increases inference costs. When applied to AI coding services, where developers set automated agents to longer-term tasks, expenses can soar quickly. This is a problem for AI coding services because they're often offered through monthly subscription plans. Many plans allow unlimited use for a fixed monthly fee, and a few users have taken advantage by bombarding the services with huge projects. These startups must still pay for the underlying AI models, so they're getting squeezed between a relatively fixed revenue stream and rapidly rising backend costs. "If you're purely reselling AI inference, your business could be very fragile and vulnerable, because the winds can shift violently," said Eric Simons, CEO of StackBlitz, and startup that offers a popular AI coding service called Claude Code whales Anthropic offered its popular Claude Code service through a $200 a month unlimited plan earlier this year. Some subscribers went berserk, using thousands of dollars' worth of AI inference over a few weeks or months. Someone even built a website to rank these AI coding whales. The Claude Code Leaderboard lists one developer at the top who's burned through almost 11 billion tokens. Tokens are how AI models break queries down into digestible data chunks. Industry pricing is based on how many tokens are processed. That top-ranked developer's token usage costs almost $35,000, according to this leaderboard. That compares to the $200 a month he's been charged. Even if that's over a whole year, Anthropic would be getting about $2,400, while incurring much higher inference costs. Anthropic is changing its pricing That's clearly unsustainable, so Anthropic plans to change its pricing. The $200 a month plan will stay, but the startup will introduce weekly rate limits, starting August 28. If users blow through these new weekly rate limits, they will have to buy additional capacity. "We've identified extreme usage by a small number of customers that impacts capacity for our broader community," an Anthropic spokesperson told Business Insider. The startup said it's also seen "policy violations," such as account sharing and reselling access. "We're committed to supporting advanced use cases long-term, but need to ensure consistent performance for all developers in the meantime," the Anthropic spokesperson added. A Swedish whale I tracked down one of the whales near the top of the Claude Code Leaderboard. Albert Örwall, a developer based in Sweden, said he's been using the $200 a month Claude Code subscription to build his own vibe-coding platform, along with some open-source agentic tools. "I was probably running 3 to 4 fairly long-running tasks in parallel constantly while I was working, and that's when it really took off," he said of his Claude Code usage. Even excluding these big projects, Örwall said his regular workflow in Claude Code likely racks up inference costs of $500 per day, under a subscription that costs only $200 a month. "So I'm guessing my workflow might not be sustainable for Anthropic," he added. Cursor responded, too When Anthropic's new pricing kicks in, Örwall said he'll keep the $200 a month subscription for a while to get a feel for what the weekly limits actually mean for his budget. "I'll avoid paying anything beyond the $200 subscription," he said, noting that he can change how he writes code and develops projects to avoid breaching the new rate limits. "The reason I originally switched from Cursor to Claude Code was because usage-based pricing became too expensive in Cursor," Örwall added. Cursor is another popular AI coding service, which often uses Anthropic's AI models as the underlying intelligence powering its product. Cursor recently switched its $20 a month Pro plan from unlimited requests to a tiered system with usage-based pricing for "fast" requests, meaning users are charged extra for exceeding a certain limit. This change, coupled with a lack of clear communication, caused confusion and frustration among some users who expected unlimited usage. Cursor announced the initial change in mid-June. Then it updated with more details about 2 weeks later, and then again in early July. "New models can spend more tokens per request on longer-horizon tasks," the startup wrote in a blog post, apologizing for surprising users with unexpected new bills. "Though most users' costs have stayed fairly constant, the hardest requests cost an order of magnitude more than simple ones." Inference costs aren't falling The assumption across the industry has been that inference costs will drop dramatically, making these AI coding services more financially viable. However, in practice, this hasn't happened thus far. Instead, when a new top AI model comes out, all the AI coding services integrate it — along with its higher prices. "This is the first faulty pillar of the 'costs will drop' strategy," Ethan Ding, CEO of startup TextQL, wrote in a recent blog. "Demand exists for 'the best language model,' period. And the best model always costs about the same, because that's what the edge of inference costs today." Developers and other AI users usually want the best, not last month's leading intelligence. "Nobody opens Claude and thinks, 'you know what? let me use the shitty version to save my boss some money.' We're cognitively greedy creatures," Ding wrote. "We want the best brain we can get." Even when inference costs do fall, the rise of agentic AI workflows means that developers set up longer, automated projects that generate a lot more tokens. If a project uses 100 million tokens, rather than 1 million, the initiative's cost remains high, even if per-token prices may have fallen. "A $20/month subscription cannot even support a user making a single $1 deep research run a day," Ding said. "But that's exactly what we're racing toward. Every improvement in model capability is an improvement in how much compute they can meaningfully consume." "There's no way to offer unlimited usage in this new world under any subscription model," he added. "The math has fundamentally broken."
Business Insider
18-05-2025
- Business
- Business Insider
Silicon Valley's hottest coding startup nearly died
In 2017, Eric Simons founded StackBlitz with his childhood friend Albert Pai. Six years later, it was the startup equivalent of the walking dead. StackBlitz raised funding to build software development tools, including WebContainers technology that let engineers create and manage projects in a browser, rather than on their laptops. The business didn't really take off, and by late 2023, things came to a head. StackBlitz wasn't generating much revenue. Growth was lackluster. At a board meeting that December, an ultimatum was issued: Show real progress, or you're toast. Simons and Pai pitched a plan to grow by ramping up sales efforts for existing products, while building new offerings that could be bigger. "We also acknowledged that it might be time to explore acquisition scenarios ahead of potential failure," Simons recalled. Then, one board member, Thomas Krane, got real: By the end of 2024, everyone needed finality on StackBlitz's fate. "I think I was saying what a lot of others were thinking in the room," Krane told Business Insider. "No one was happy with the trajectory," venture capitalist and StackBlitz board director Sarah Guo remembers. "We needed a new plan." When the meeting ended, Simons walked out of his "shed-turned-home office" into his backyard on a cloudy, windy Bay Area day to try to process the news. "It was a tough pill to swallow, but we agreed," he said. As 2024 began, it looked like StackBlitz was about to become one of the thousands of startups that fizzle into the abyss of venture capital history every year. Not so fast. In Silicon Valley, fortunes can turn on dime as new inventions spread like wildfire, incinerating legacy technology and feeding unlikely growth from the embers. And this is what happened to StackBlitz. Noodling with OpenAI models In early 2024, Simons, Pai, and their co-workers probably should have been meeting more with the investment bankers Krane had introduced them to — an attempt to ring what value remained from the struggling startup. Instead, like Silicon Valley founders often do, they were noodling with new technology, seeing how OpenAI models performed on coding tasks. "The code output from their models would break, and the web apps created were buggy and unreliable," Simons said. "We thought it would be years before this improved. So we dropped that side project after about two weeks." A Bolt from the blue Then, in June 2024, OpenAI rival Anthropic launched its Sonnet 3.5 AI model. This was a lot better at coding, and it became the technical foundation for an explosion in AI coding startups, such as Cursor and Lovable, and an important driver of what's now known as vibe coding. That summer, StackBlitz started working on a new product that relied on Anthropic's breakthrough to bring coding to non-technical users. On Oct. 3, StackBlitz launched this new service. It was called a play on the startup's lightning-bolt logo. It took roughly 10 employees three months to create. Bolt used StackBlitz's technological base — that WebContainers underpinning that allows engineers to work in a browser — and added a simple box on top with a flashing cursor and a question, "What do you want to build?" The service offered a tantalizingly simple proposition: Type what you want to create in plain English and Bolt's software would tap into Anthropic's Sonnet model in the background and write the code needed to create a website or a mobile app. And not just simple sites to share your wedding photos. Full applications that let users take valuable actions including logging in, subscribing, and buying things. Before this, digital products like these required professional software engineers and developers to build them using complex coding languages and tricky tools that were way beyond the capabilities of non-technical people. Simons emailed StackBlitz investors to tell them about Bolt, and asked for their help. "If you can RT/share on X, and/or share with 3 developers you know, myself and the team would be extremely appreciative!" he wrote, according to a copy of that email obtained by BI. Crying in a "shed office" The first week that came out, it generated about $1 million of annual recurring revenue, or ARR, a common way cloud software services from startups are measured financially. The next week, it added another $1 million in ARR, and then another, according to Simons. StackBlitz wasn't, in fact, going to shut down. Instead, it had a hit on its hands. "I had slept three hours a night for a week straight to get the release out with our team," Simons told BI. "After seeing it live, and people loving it — beyond anything I had ever created before — I cried, alone at my desk in my backyard shed office." A very different investor update On the first day of November, Simons wrote a very different email to his investors. The subject line read, StackBlitz October Update: $0 to $4m ARR in 30 days. The number of active Bolt customers surged from about 600 to more than 14,000 in the first few weeks, according to a copy of the email obtained by BI. ARR soared from roughly $80,000 to more than $4 million in the same period. "You can imagine after years of grinding on our amazing core technology, endlessly searching for a valuable business use case of it, just striking out over and over again, how I and the team feel looking at this graph," Simons wrote. "If you had to put it into a word or two, it'd be something like 'HELL. YES.'" When talented technologists are pushed to search harder for new ways to monetize their inventions, on a tight deadline, sometimes magic happens, according to Krane from Insight Partners. "That life-or-death pressure led to a series of rapid pivots that ultimately led to this incredible outcome," he told BI. "This company broke every model in terms of growth rate." A new pricing model There was so much customer demand for Bolt that StackBlitz raised prices after about a week. The main subscription plan went from $9 a month to $20 a month. The startup also added new pricing tiers that cost $50, $100, and $200 a month. A few weeks after this change, almost half of Bolt's paying users were on more expensive plans. Simons said StackBlitz may have stumbled upon a new pricing model for AI code-generation services. (Turns out, he did). Every time a Bolt user typed in a request, this was transformed into " tokens," which AI models use to break letters, numbers, and other characters into digestible chunks. Each token costs a certain amount to process. Bolt users were sending in so many requests they were blowing through their token limits. So StackBlitz introduced tiered pricing so customers could pay extra to get more tokens. "Customers are willing to pay a lot of money for heavier usage of AI inference," Simons told his investors. One customer was quoted $5,000 and a 2-3 month timeframe by a Ukrainian contractor to develop an app. Instead, she bought Bolt's $50 a month plan, and built the app herself in less than two weeks. "1/100th of the cost, and 5-10x faster timeline," Simons wrote. A carrot or a stick? Simons also couldn't resist an invitation to stay on the rocket ship, dropping a classic Silicon Valley funding-raise carrot. Or was it stick? "We've also received substantial inbound interest from VCs and from strategic acquirers," the CEO wrote in the Nov. 1 email to investors. "So we're starting to explore how best to play our hand(s) in the coming weeks/months here." (Earlier this year, reports emerged of a new funding round valuing StackBlitz at roughly $700 million). With StackBlitz's demise averted, Simons realigned resources to focus on Bolt. The startup hired more staff and added Supabase, a database service that stores transaction data, user registrations, and other crucial information. It also added Stripe technology so Bolt users can easily accept card and digital payments. StackBlitz also spent heavily to educate customers on how to use Bolt better, running weekly live YouTube video sessions. Waiting for Anthropic Bolt was off the races. But there was still one big hurdle involving Anthropic. Back in the spring of 2024, an Anthropic cofounder filled out a "Contact Us" form on StackBlitz's site. The form asked anyone who wanted to license the WebContainers technology to fill out some basic details. "After we saw that form, we called to chat. He said Anthropic was working on a project and this could help," Simons recalled, without identifying the cofounder. For the first year, StackBlitz proposed a license for Anthropic with uncapped usage for about $300,000. "With hindsight, we made them a smokin' deal," Simons said. "We were desperate at that point." Other big customers might follow Anthropic's lead and sign license deals, too, the thinking went. By October, though, when Bolt had taken off using the same web-based StackBlitz technology, a $300,000 uncapped license suddenly looked like a very bad deal for Simons's startup. But there was a catch: Anthropic had to sign the contract by the end of October, otherwise the deal would expire. Simons and his StackBlitz co-workers watched the clock like hawks. "We were like, god, please don't sign it," Simons told BI. The deadline finally passed. Anthropic never signed. Simons doesn't know exactly why the AI lab didn't put pen to paper. However, he noted that Anthropic has "a lot of things going on." "They were like, 'we might come back to this in the future maybe,'" Simons said. "We have a great relationship with Anthropic. They are doing an incredible amount of revenue now, and so are we." Whatever the reason, StackBlitz was now free to pursue its Bolt growth strategy. A podcast appearance By December 6, Simons appeared on No Priors, a popular AI podcast hosted by Guo and another top AI startup investor, Elad Gil. (Guo is an early backer of StackBlitz). The CEO shared that Bolt was generating $20 million in ARR, just a few months after it launched. By the middle of March 2025, Bolt's ARR had jumped to $40 million. In a recent interview with BI, Simons wouldn't share more revenue details. However, he said StackBlitz planned to announce a new ARR number when Bolt passes triple-digit ARR, meaning more than $100 million. The service has 5 million registered users now, and Simons said StackBlitz is profitable, growing, and healthy. There's even a new name for the millions of non-technical users who craft digital offerings through Bolt. Simons calls them "software composers." A hackathon meeting He explained this to me at a "hackathon" event StackBlitz held on May 7 in San Francisco. Hundreds of "composers," along with other customers, partners, and investors, partied late into the evening, with The Chainsmokers DJ-ing. (The duo are StackBlitz investors). Simons held court, schmoozed and chatted, with a wide grin and seemingly endless energy. Through the din, I asked him if he was concerned about rival AI coding services nipping at his heels. After all, it had been about seven months since Bolt launched — a lifetime in Silicon Valley AI circles. Simons seemed unperturbed. He said the years of hard work that StackBlitz spent developing its WebContainers technology gives Bolt an edge that most rivals don't have. This allows Bolt-based applications to be built and run applications using the chips on customers' devices, such as laptops. Other AI coding providers must tap a cloud service each time a user spins up a project, which can get very expensive and technical, according to Simons. "People assume we're a startup that just launched yesterday," he said. "But we're an overnight success, seven years in the making." A party duel with Figma The competition doesn't wait long to respond in Silicon Valley, though. A few San Francisco blocks away, on the same day as Bolt's hackathon party, graphic design giant Figma announced a competing product at its annual Config conference. Figma Make is a new tool that helps developers create web apps using conversational prompts, rather than specialized software code. Sound familiar? "We believe there are multiple huge companies to be built here, and that the market for engineering is bigger because of AI," Guo said. Simons noted that this new Figma service doesn't use the same WebContainers technology that supports Bolt. "We wrote an operating system from scratch that runs in your browser. It's completely different from what Figma has," he argued. Still, I could tell Figma had made an impact. "What are the odds that we were throwing a giant party on the same day as their launch across the road? I'll leave that to your writer's imagination," Simons told me, with a giggle.
