📶 SaaS isn’t dead ... long live SaaS

Why SaaS is here to stay

SignalFire raises $1b

Craft Ventures goes through layoffs

Industry launches a massive secondaries fund

AI could potentially render the current SaaS model of selling vertical or horizontal, configurable workflow software at 30% free cash flow margins into perpetuity, a thing of the past. In an overly simplistic way, selling seats (or consumption) to knowledge workers to click, see data / dashboards, and process workflow on computer screens and/or mobile devices should and can eventually be disrupted massively by AI through agents. As a result, business models could be upended.

The best SaaS companies make their money with high structural retention and upsell. Change management is a real issue; moving from one software vendor to another is hard work, particularly for large companies with embedded processes, existing data (data gravity), and built-out integrations. It’s even more challenging to move from system of record platforms, which comprise the most successful public SaaS companies.

In an overly simplistic way, selling seats (or consumption) to knowledge workers to click, see data / dashboards, and process workflow on computer screens and/or mobile devices should and can eventually be disrupted massively by AI through agents. As a result, business models could be upended.

From a financial perspective, the value of a SaaS company is the net present value of future cash flows. SaaS companies pay to acquire a customer upfront and recognize this annuity stream of revenue and cash flow over time. Moreover, the best companies have high retention rates and net dollar retention of well over 100%, which creates massively profitable cohorts over time.

At least one company, Klarna, has announced they have churned from core systems of record in Workday and Salesforce and are rebuilding the functionality using OpenAI as a backend. For the time being, this is likely to be a rare circumstance – very few companies have the resources, expertise, and willingness to take on the risk of rebuilding massive third-party applications and workflows offered by the likes of Salesforce and Workday.

Agents will only improve, and agents will undoubtedly become part of the offerings from current SaaS platforms and create new companies. Agents will also open up more market opportunities as they will fill the white space not offered by the status quo SaaS platforms.

The surface area of software will eventually consume every workflow – both professional and personal – and agents could enable this to happen quicker than anyone ever thought possible.

Companies and technologists are heralding AI and agents as the next greatest thing, i.e., there are no “naysayers”. In the end, this should be great for both buyers and users of software as there will be more and better options, and the software markets will grow and become more valuable.

For the next generation of market-leading companies, AI / agents will be infused into the fabric of every piece of their software and the lines will blur on what is SaaS or cloud or AI.

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Industry Ventures Launches Liquidity Program for Venture Capital Managers (WSJ)

SignalFire raises $1B as AI wave keeps booming (Pitchbook)

David Sacks’ Craft Ventures Lays Off Staff, Co-Founder Steps Back (The Information)

How Kalshi helped prediction markets go mainstream (TechCrunch)

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