If we build our AI operations using licensed third-party platforms, are we destroying our enterprise value by failing to own our proprietary IP? How do we frame this in our strategic exit planning?

Question

Tyler Smith · Accepted Answer

Many owners fear that relying on third-party AI platforms like OpenAI or Microsoft will destroy their company's valuation because they do not own the underlying technology. They believe they must build proprietary models from scratch to create real enterprise value. This fear is largely unfounded and can lead to disastrous capital allocation decisions. When valuing a business, buyers look at your stable cash flows and your operational leverage. Absolute valuation is driven by your ability to generate sustainable, high-margin revenue over time. If using third-party APIs allows you to run a highly profitable, low-overhead operation, your valuation will soar regardless of who owns the base LLM. The key is to build your own proprietary data layer and workflows on top of those third-party models. Your unique value lies in your proprietary data, your custom prompts, your systemized workflows, and your customer relationships. These are the assets that create a moat around your business. During your next strategic planning session, focus on how you can secure and package these proprietary assets. Do not waste capital trying to build your own AI model when you can license a better one for pennies. Instead, focus on building the systemized workflows that turn that raw technology into a repeatable, high-margin machine that any buyer would pay a premium to acquire.