The AI Wrapper Epidemic

The Promise

The moment OpenAI released the GPT-3 API in June 2020, a gold rush began. Entrepreneurs realized they could wrap OpenAI’s magic in a nice interface, add some templates, and charge a subscription. The AI did the hard work; they just had to handle the billing.

By the time ChatGPT launched in November 2022, the wrapper ecosystem was already thriving. Companies had raised hundreds of millions to build AI writing tools (Jasper, Copy.ai, Writesonic), AI coding assistants (beyond GitHub Copilot), AI customer service (Ada, Intercom), AI legal tools (Harvey, Casetext), AI sales tools (Gong, Outreach), and AI everything-else.

The pitch to users was simple: “ChatGPT, but for your specific use case.” The pitch to investors was equally simple: “We’ve found product-market fit, and AI is eating the world.” Valuations soared. Jasper hit $1.5 billion. Copy.ai raised at $250 million. A generation of startups was built on the premise that vertical AI applications would capture durable value.

The Rise

The numbers were intoxicating. Jasper claimed $45 million ARR within months of launch. Copy.ai reported similar hockey-stick growth. AI writing tools were the fastest-growing software category in 2022. Every marketing team, every content creator, every small business owner wanted in.

The investment thesis seemed bulletproof. OpenAI provided the intelligence, but wrappers provided the interface, the workflows, the integrations, the brand. Users didn’t want a blank chat box—they wanted purpose-built tools. The analogy was cloud computing: AWS provides the infrastructure, but application companies capture the value.

VCs poured money in. Y Combinator batches filled with GPT wrappers. Accelerators spun up AI tracks. The advice was unanimous: find a vertical, build a wrapper, scale fast.

The Fall

Then ChatGPT went free, and the thesis collapsed.

The moats that wrappers thought they had—better interfaces, specific templates, industry knowledge—turned out to be sandbars. When the underlying model improved (GPT-4, Claude, etc.), the value of custom prompts and templates evaporated. Users could just ask ChatGPT directly. Why pay $49/month for an AI writing tool when ChatGPT could write the same content for $20/month—or free?

The revenue crashes were swift. Jasper’s ARR dropped from $120 million to $55 million in one year. Copy.ai went quiet. Dozens of AI writing tools shut down or pivoted. The category that had been the hottest in tech became a cautionary tale in under 18 months.

The survivors were those who had built genuine differentiation: proprietary data, unique workflows, enterprise relationships, or technical moats beyond API access. But they were the minority. Most wrappers discovered that they had been renting their core value proposition, and the landlord had decided to compete with them directly.

The lesson was brutal: when your entire product can be replicated by a better prompt, you don’t have a product. You have a demo.

Warning Signs

• No proprietary technology: If your entire product is an OpenAI API call with a custom prompt, you have no moat
• Single-vendor dependency: Building on one provider’s API without alternatives is existential risk
• Undifferentiated templates: “Blog post generator” and “email writer” templates can be replicated in minutes
• No data advantage: Without proprietary training data, you’re just reselling someone else’s intelligence
• Race-to-the-bottom pricing: Commodity products compete on price until margins disappear

Epitaph

🪦 They called it AI. OpenAI called it their API.