Two former co-founders of Newcastle digital agency hedgehog lab have joined forces to launch a rival venture, LevelFive, an AI-native digital product studio. Sarat Pediredla, former CEO, and Alan Morris, former CTO, aim to disrupt the traditional agency model by leveraging artificial intelligence to deliver fixed-price outcomes in shorter timeframes.
A new approach to software development
LevelFive will be headquartered at Newcastle's Helix site and will not track billable hours or publish day rates. Instead, projects will be commissioned on a fixed budget, with products typically delivered within eight to twelve weeks using an in-house agentic operating system. The founders argue that AI has fundamentally changed the economics of software development, enabling smaller, senior teams to work efficiently without the uncertainty that previously made fixed-price contracts risky.
Under this model, LevelFive will retain any margin if AI accelerates development, but will absorb costs if overruns occur. According to Pediredla, this "skin in the game" approach ensures AI is embedded in every project, not sold as an add-on service. He described the opportunity as the clearest commercial opening he has seen in two decades, noting that mid-market clients have long sought fixed-price outcomes, which the industry traditionally resisted due to the unpredictability of building software.
Industry veterans with deep experience
Pediredla founded hedgehog lab in 2007 and grew it with investor backing. Morris, the engineering co-founder, brings 20 years of production software experience, most recently in agentic delivery for healthcare. He said: "AI is the next generational shift in technology after cloud and mobile. A senior engineer's value lies in knowing what to build and how to build it, gained through years of problem-solving. Agents multiply that experience to unlock a step change in productivity and quality, allowing two senior engineers to ship faster than entire teams once did."
Morris added that the interesting questions now shift up the stack: deciding which decisions belong to a senior human and which to an agent. This, he said, is the opportunity for builders joining LevelFive and for clients they serve.
Target market and growth plans
LevelFive will target mid-market businesses and private equity-backed companies. The firm is currently accepting applications for senior associate positions, signalling its intent to scale quickly.
