Former hedgehog lab bosses join forces to launch rival venture

Sarat Pediredla and Alan Morris have launched a Newcastle-based venture that will use AI to disrupt the traditional agency model

Two co-founders of Newcastle digital agency hedgehog lab have launched what they call an AI-native digital product studio.

Hedgehog lab co-founder Sarat Pediredla and former chief technology officer (CTO) Alan Morris have launched LevelFive in a bid to capitalise on the productivity gains available through new technology. They say AI has “changed the maths” of building software, meaning smaller, senior teams working to fixed budgets will be the industry norm.

Unlike traditional agencies, LevelFive will not track the time of its team or publish day rates. The firm – which will be based in Newcastle’s Helix site – will be commissioned on a fixed budget with products typically delivered in eight to 12 weeks using an in-house agentic operating system.

The model means LevelFive will aim to keep the margin if its AI-led development creates software faster, but it will absorb costs it it overruns. Mr Pediredla said the “skin in the game” approach sees LevelFive using AI in every project, not as a service to be sold separately.

Mr Pediredla, who founded hedgehog lab in 2007 and grew it securing investor backers, said opportunity is the clearest commercial opening he has seen in two decades. He added: “Mid-market clients have been asking for fixed-price outcomes for as long as we have been selling them digital services. Our industry has always said no, because the uncertainty and risk of building software made fixed prices impossible to commit to.

“AI-native delivery is what finally changes that. We can ship in eight to 12 weeks what used to take six months, price the outcome instead of the days, and both sides come out better. That is not a marginal improvement, it is a different business. I have not seen a commercial opening this clean in 20 years.”

Alan Morris, the engineering co-founder and former CTO of hedgehog lab, has spent 20 years in production software, most recently in agentic delivery for the healthcare industry.

He said: “AI is the next generational shift in technology after cloud and mobile. A senior engineer’s value is in knowing what to build, and how to build it, gained through years of experience solving problems across domains. Agents multiply that experience to unlock a step change in both productivity and quality, letting two senior engineers ship faster than whole teams once did.

“The interesting questions move up the stack: which decisions belong to a senior human, which belong to an agent. That is the opportunity for builders who join us, and for the clients we ship for.”

LevelFive’s founders say it will target mid-market businesses and private equity-backed companies. The firm is now open to senior associate applications.