Generative Artificial Intelligence (GenAI) is disrupting numerous fields of human endeavors, including software startups. While GenAI tools hold the promise of accelerating innovation, improving product quality, and enhancing decision-making, software startups during their inception stage, a phase characterized by high uncertainty and limited resources, may face significant challenges in using these technologies. However, understanding the opportunities and challenges that GenAI brings to software startups is scarce due to the nascent nature of GenAI tools.

Our study aims to provide an initial understanding of the intriguing research phenomenon of GenAI application in early-stage software startups. An action case study approach is employed in our study. We examined two software startups within a university setting, focusing on how these teams utilized GenAI tools in the inception stage.

The findings revealed 11 opportunities and 10 challenges of using GenAI tools in the inception stage. Novel findings in the startup context include opportunities like brand identity development, generating landing pages, simulating customer feedback, and validating MVP. In contrast, challenges include a function-oriented rather than problem-oriented and a tendency to please rather than provide critical feedback. The findings suggest that while GenAI tools offer valuable benefits for startups, successful adoption requires careful consideration of technical and non-technical factors. This research opens avenues for future studies on integrating GenAI in early-stage software startups.