McGrew: FDE deployments start at negative margins before becoming profitable
Bob McGrew · The FDE Playbook for AI Startups with Bob McGrew · Y Combinator · Sep 8, 2025 · at 15:03
Former Palantir executive Bob McGrew addresses the criticism that forward-deployed engineering (FDE) is merely an unscalable consulting business.
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“From a business model perspective, one of the key things that you will see, that you should see, is that it may be the case that you're, when you go into, you do a new deployment at a customer, that you're actually losing money early on. As the longer you're at the customer, first thing is your product, because of the product discovery, gets better suited to what the customer does. And so you no longer need a large team of people at the customer site figuring out what the customer is doing, you know, paving, you know, writing that. Code. The second thing is that you should be earning the right, as Sean would put it, to have access to more important problems at the customer site. And so you should see basically that your cost per value of the outcome you're delivering is going down. And so your profit margins start off negative, but then ultimately become positive after some period of time, maybe a year, maybe multiple years at the customer site.”
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