The SaaSpocalpse: A Postmortem

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Today’s Lineup

River AI Co-Founder & CEO Igor Babuschkin at 11:55 AM
CoreWeave Co-Founder & Chief Development Officer Brannin McBee at 12:10 PM
Flock Safety Founder & CEO Garrett Langley at 12:25 PM
Sequoia Capital Partner Sonya Huang at 12:40 PM
Parasma Founder & CEO Sean Cole at 12:55 PM

Run of Show

The SaaSpocalpse: A Postmortem

About 6 months ago, we here at TBPN cancelled the SaaSpocalypse. About $2 trillion in market cap had been wiped out and software investors were in full doom mode. It appeared only logical that every company would be vibecoding their own CRMs imminently and any company that was built on a big pile of code would go to zero. Of course, the core thesis still holds but the reality is much messier. Yes, having a huge monolithic piece of software is less of a moat today than it was a decade ago, Competition is increasing, especially for point solutions, but many of these SaaS companies were revealed to have sources of strength that didn’t fit neatly into the “lots of LOC written” bucket. Babies were thrown out with the bathwater and now we are watching many, many comeback stories play out.

6 months ago we discussed Google, Meta, Spotify, Shopify, Roblox, and Salesforce as evidence that large, scaled software companies could avoid getting wiped out by the coming wave of agentic coding tools due to marketplace dynamics, network effects, strong go to market organizations, etc. Jordi put it really clearly on the show after Shopify’s last earnings beat (and subsequent 20% stock pop): “Shopify isn’t a victim of AI, AI is a victim of Shopify.”

We now have a long list of “unsloppable” SaaS companies that are “AI winners” and it’s a lot of who you would expect.

Cybersecurity is more important than ever, so Crowdstrike and Palo Alto Networks are both ripping.

At the same time, there are still companies that have not found a way forward in the AI era. Chegg is the canonical example, but The Information is reporting that Canva is slipping into a similar situation.

There are a bunch of SaaS winners that have been able to position themselves “in the token path” by serving AI labs directly with data and infrastructure products, but there are also tools companies like Twilio that have enough built out that new software products will use them more and more as agents scale out.

Despite the rebound, the questions around many SaaS companies’ long-term durability and value are very real, but it will likely take another year or two to fully understand who the real winners and losers are. The beauty of true, contracted revenue is that these companies actually do have the time to figure that out, or maybe just fade into obscurity, or as Jordi would say “get their spoon bent” by Mr. Ferrari.

But until then, SaaS is holding on. The iShares Expanded Tech-Software Sector ETF is up 25% in the last 6 months. — John

Clip Spotlight: Jordi has a pitch for Josh Kushner and Bob Iger’s next business venture

Josh Kushner and Bob Iger's purchase of the LA Lakers is both historic and a bet on LA's future.

Their next investment should be in our Pothole Filling Company of LA, which will figure out how to fix the city's potholes quickly.

There's a reason every other car in LA is a G-Wagon. The roads are so bad that you basically need 4WD to make it to where you're going without blowing a tire.