SaaStr 835: AI + B2B in 2026: Find the Tailwinds or Get Left Behind with SaaStr CEO and Founder Jason Lemkin

2 Jan 2026 · 56 min · 27 chapters

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In short

Podcast Notes: SaaStr 835 - AI + B2B in 2026 with Jason Lemkin

Episode Overview In this episode of the Official SaaStr Podcast, Jason Lemkin discusses the future of AI in B2B, particularly focusing on the year 2026. He emphasizes that while software spending is projected to reach record levels, businesses must adapt to capture this growth or risk being left behind. Lemkin explores the paradox of easier scaling for a select few companies, while the majority struggle, and shares insights on venture capital trends, AI product adoption, and the importance of efficiency metrics.

Key Insights

The Current State of B2B and AI

  • Software Spend Projections: Expected to hit record levels in 2026, driven significantly by AI investments.
  • Growth Paradox: While scaling to $100 million ARR (Annual Recurring Revenue) has never been easier for a few companies, the majority face challenges.
  • Venture Capital Concentration: Currently, half of all VC funding is directed towards only four deals, highlighting a risk for other startups.
  • AI Product Necessity: Merely adding an AI copilot or features won't suffice; businesses must fundamentally enhance their functionality.

Metrics for Success in 2026

  • Performance Metrics: Founders must track specific efficiency metrics to measure growth effectively.
  • Demand for AI Solutions: 30% of new IT budgets are allocated to AI, creating an opportunity for companies to capture this budget.
  • Tailwinds vs. Headwinds: Lemkin encourages companies to focus on finding tailwinds—those market forces favoring their growth—rather than struggling against headwinds.

Venture Capital Dynamics

  • Changing Investment Focus: Investors are increasingly drawn to late-stage AI deals due to perceived ease of capital returns compared to early-stage investments.
  • Funding Landscape: The landscape is uneven; while overall capital may be plentiful, it is concentrated in a few high-value AI startups, making fundraising difficult for many.

Importance of AI in B2B

  • AI's Role: Successful AI tools can dramatically replace or augment human roles, leading to increased productivity and profitability.
  • TAM Expansion: Companies leveraging AI effectively can significantly expand their Total Addressable Market (TAM), allowing them to charge more for their offerings.

Key Takeaways

  • Inevitability of Change: Companies that fail to adapt and re-accelerate their growth by 2026 risk severe consequences.
  • Productivity Gains: It's essential for companies to focus on products that either replace or dramatically augment existing human work to capture budget allocations.
  • Market Positioning: Firms must assess their competitiveness and market share diligently, especially in an increasingly crowded AI space.

Recommendations

  • Investment in AI Development: Start building or enhancing AI products that replace human tasks or boost productivity significantly.
  • Focus on Metrics: Regularly track and analyze efficiency metrics to ensure growth and adaptability.
  • Networking and Learning: Engage with peers and experts in the SaaS community to stay updated on trends and best practices.

Conclusion Jason Lemkin's insights in this episode reflect the urgent need for B2B companies to not only embrace AI but to also innovate continually. Those who can harness the opportunities presented by AI will thrive, while those who fail to adapt may find themselves left behind in a rapidly evolving landscape.

Written by AI. May contain mistakes. Listen to the episode to check what was said.

Chapters

Tap a time to open that second in VO

Assessing Growth in SaaS

0:45 to 2:15

Discussion on growth expectations for SaaS companies in 2023.

“So this is your job to go find it, right?”

Finding Tailwinds for Success

3:30 to 6:00

Advice on identifying market tailwinds to drive business success.

“But there is budget out there and there is incredible demand.”

The Paradox of Current Market Conditions

6:00 to 9:30

Exploration of the contradictory nature of the current business environment.

“today it is very concentrated in the very top and it doesn't necessarily make most folks lives easier and I'll show you the data.”

Venture Capital Dynamics Today

9:30 to 12:10

Analysis of the concentration of venture capital in a few major deals.

“Replen and Lovable, one to 200 million already this year.”

Challenges and Opportunities for Startups

12:10 to 14:00

Discussion on the challenges startups face in raising capital and competing in the market.

“The deal count's like a fraction of what it was.”

The Shift in Investment Strategies

14:00 to 15:00

Discover the changing landscape of venture capital and why early-stage investing is becoming less attractive.

“It's just because there's no ceiling to the best of them.”

The Impact of AI on Venture Capital

15:00 to 16:56

Explore how the rise of AI companies is influencing the allocation of venture capital funds.

“Don't expect the classic triple, triple, double, double startup, which is hard to do in B2B.”

IPO Market Analysis and Trends

16:56 to 19:08

Learn about the recent trends in the IPO market, including challenges and opportunities.

“As long as you have runway, as long as you have time, you don't really have to worry about where NASDAQ is today.”

The Changing Landscape of Startups

19:08 to 21:44

Understand how the age and experience of startups and founders are shifting in the competitive landscape.

“74 % down from its peak, Jai minus 30, Karn is even worse, it's 47 % today.”

Challenges for Established Companies

21:44 to 23:26

Examine the difficulties faced by older companies in attracting investment compared to newer startups.

“your VCs probably just don't, your investors probably mostly, at least in the US, they just don't care anymore.”
Show all 27 chapters

Software Spending Trends and Budgets

23:26 to 26:00

Analyze the spending habits of companies in software and how AI is reshaping budget allocations.

“But honestly, I don't know anyone that talks to more CEOs and buyers of software than Gartner, okay?”

Future Predictions for AI and Software

26:00 to 28:00

Gain insight into future predictions for AI's impact on software and technology investment.

“A great product that optimizes workflow, that has an ROI calculator on your website, that makes your team more productive, there's just no frigging budget for it.”

Market Trends in B2B AI Growth

28:00 to 28:44

Learn about the divergence in valuations based on company growth in the B2B sector.

“So I literally just copied this from saster.ai slash markets.”

Growth Rates and Valuation Multiples

28:44 to 30:00

Understand how growth rates impact company valuations and market expectations.

“Faster-growing companies are worth more than slower-growing companies.”

Profitability vs. Growth in SaaS

30:00 to 31:16

Explore the importance of balancing profitability with growth to attract investment.

“So like the markets, the public markets only expect pretty good growth.”

AI's Role in Market Valuation

31:16 to 32:58

Discover how AI investments affect market valuations and company strategies.

“Here's another one that looked good at first.”

Budgeting for AI Innovations

32:58 to 35:26

Learn how companies are budgeting for AI innovations and replacing human roles.

“They didn't build gamma or repli or, or whatnot.”

Radical Augmentation with AI Tools

35:26 to 37:41

Understand how AI tools dramatically enhance productivity in software development.

“And there's, if you can, if you can get rid of a hundred million effect, there's probably room for a couple hundred thousand dollars a year of your tool.”

The AI Super Cycle

37:41 to 39:27

Learn about the concept of a super cycle in AI and its implications for the market.

“Or three, an incredible level of productivity.”

Identifying AI Needs in Businesses

39:27 to 42:01

Explore how businesses identify and prioritize their AI needs to drive growth.

“But this is why you've got to be in market with an AI product A &B because everyone's in market at the same time.”

The Necessity of AI Tools for Businesses

42:01 to 43:19

Explore the essential AI tools businesses need to survive and thrive.

“No, but they want a clay or qualifier artist or other folks you've talked to.”

TAM Expansion Through AI

43:20 to 44:31

Learn how AI products can significantly expand Total Addressable Market (TAM).

“They've gotten to double digits of their market.”

Understanding Market Position in the Age of AI

44:32 to 46:03

Discuss the importance of market share and being honest about competition.

“I mean, do you know any CRM that costs 50K to 100K a year?”

The Fast-Track to Efficiency in SaaS Companies

46:04 to 48:30

Analyze how companies can achieve efficiency through leaner teams and AI.

“Microsoft learned no one wanted to pay an extra$20 a month to talk to Word.”

The Changing Landscape of Software Companies

48:31 to 54:04

Understand the trends affecting software companies and their operations.

“And the one thing, the honest thing to ask yourself, and if your founder is maybe not even to share with below your management team.”

Opportunities in the Upcoming Software Spend Boom

54:05 to 55:50

Identify the potential for revenue growth in the software industry.

“If they want to double next year and they need to increase their team 50%, sounds good to me, okay?”

AI Agents Revolutionizing Support

56:00 to 56:15

Explore how AI agents can automate support tasks and improve efficiency.

“One that triages tickets, another that catches duplicates, one that spots churn risk.”
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Transcript

Automatic transcript. May contain errors.

0:01Welcome to the official Sastr Podcast where you can hear some of the best Sastr speakers. This is what the cloud means. Up today on the Sastra podcast. Frankly, if you didn't accelerate growth at all, you get a D because you had a year. You had a year. I give everyone a pass for last year. I give everyone a big pass for 2023. All these tools were kind of terrible in AI. No one gets a pass this year. You saw it coming. You saw it changing. You saw these agentic tools getting better. If you didn't re-accelerate and you weren't in market with a great agent, a great agentic product this year, you get a D-, but you don't get an F because you got through the year.

0:41But you can't get a D next year. You're late. So this is your job to go find it, right? Find the tailwinds.

0:52Hey Sasser, imagine having agents for every support tab. One that triages tickets, another that catches duplicates, one that spots churn risk. That'd be pretty amazing, right? HappyFox just made it real with Autopilot. These pre-built AI agents deploy in about 60 seconds and run for as low as 2 cents per successful action. All of it sits inside the HappyFox Omni-Channel AI First support stack. Chatbot, Co-Pilot, and Autopilot working as one. Check them out at happyfox.com slash Saster.

1:25Hey, everybody. Saster Annual will be back May 2026, the world's largest SaaS and AI gathering for executives. Just as last May, we hosted 10 ,000 attendees with 68 VP level and above attendees, 36 % CEOs and founders, and 25 % were AI first professionals. It's the very best of S-tier attendees and decision makers that come to Saster Annual and AI Summit each and every year. But here's the reality, folks. The longer you wait, the higher ticket prices get. They're cheap now. They're cheap, so just get them. Early lock in your spot today. Use my code Jason100 for exclusive savings. Get your tickets at podcast.sasteranual.com or just use code Jason100 when you check out.

2:06See you there. Saster Annual and AI Summit 2026. It will rock.

2:15the theme of this session so much of what we've done has been tactical this will be tactical in a different way is what's your job for next year and i think a lot of folks that have already been here today and yesterday have come out and my job is to bring back a couple of agents next year my job is to automate gtm my job is to move faster and use these tools and that's all great and the rest of the year our whole theme will be very tactical how do the tools work what works? What are the blockers? But I think the most important thing strategically for folks here, if you have not re-accelerated or accelerate this year is you've got to find your tailwinds.

2:52You've got to find your tailwinds. And I'm going to walk you through this in the next slide that we're almost in a time of a paradox. We are in a time of an almost paradox in 26. some things are much easier and certainly much faster than just 18 months ago some things are harder and i want to walk through why that's confusing when you dig into trends dig into data and dig in what's happening and i'm gonna i want to spend 25 minutes or so walking through what's really happening from buying to funding to vc and more but your job is to grab some of this AI mojo if you don't have it. We're not all clay or artisan or, uh, anthropic or gamma.

3:36And that's okay. But there is budget out there and there is incredible demand. And even if you're not seeing the demand for your own product, you can feel your own demand for other vendors. There is budget there and your job is to frigging get it to attach to those headwinds for wheel. I'm sorry. The tailwinds for real, not battle the headwinds, not battle people that don't want to buy your product anymore because it's not AA native or it doesn't do what you want. Your job is to radically increase the functionality of your product so you can tap into what buyers want to buy right now, not what they wanted to buy in 2023, let alone 2021.

4:10That's your job. Your job is to find these tailwinds because they're there, but it's not obvious. So let me kind of summarize this and then I'll dig into it. And I know you may know some of this, you may know a little bit, but I'm going to go to it in some depth, which is one of the things that's most confusing, especially if you're on the social medias, the X's and the LinkedIn, is what the F is going on in venture capital? Because every day we read about, you know, Supabase, you know, database for AI,$5 billion last week,$2 billion the week before,$1 billion before that. We see replanted lovable from$0 to$200 million this year going from, you know, in some cases, nothing to$4 billion valuation, it's got to be easy, right?

4:50It's got to be easy. I think most people in this room will tell you it's actually harder to raise capital despite these big deals because a handful of big AI deals are absorbing all the capital. And I'll show you the data very crisply. So it's a weird time if fundraising matters to you, if raising money matters to you, because in some ways the dollars are back to the craziness of 2021, but it is not distributed evenly. Half of all the venture capitalists here is going into four deals. Four deals. And 2021 was so different than today. It was being locked down. There were so many things. But beyond all that, it was very distributed.

5:34There were basically any SaaS company that could get to 20 million or so ARR back then was going to grow triple digits and was going to get funded and was going to become a unicorn. okay i remember sitting with a leading vc in 2021 and he was telling going down his portfolio and saying well this one will be unicorn about 90 days this one will be unicorn about 110 days and that that's just the way it worked it was very distributed and there's almost a thousand of these unicorns from 2021 waiting to possibly never go public okay it is not as evenly distributed today it is very concentrated in the very top and it doesn't necessarily make most folks lives easier and I'll show you the data.

6:12Half put into four deals, the numbers the same, the dollars the same, but half put into four deals is nothing like the last wave. This one's really important. I'm going to show you the data. Software spend is accelerating to a record level next year, especially the enterprise, a record level. It is re-accelerating the CIO's budget. But in 2021, in 2022, it was evenly distributed. Everyone got some. You know, every GTM tool, every e-signature tool, every zoom in tool, everyone got some of this budget. Not the way it's working now. Of this record budget increase, according to Gardner, which I'll show you, half is going into price increases, right?

6:51A few years ago, not everybody increased prices seven or 8 % every year. Now everyone's doing it to fatiguing their base. So half of this record span is going to price increases. And it's not quite that simple. It's not just raising prices per seat. It's also additional offerings from the vendors, which we'll dig into. So half of this bonanza is going to existing vendors, which you don't get. And 30 % of it is going into new AI tools that they're bringing in. Doesn't leave much left for all the rest. And in fact, what I'll show you is if you're not in existing vendors that are able to increase pricing and you're not in a top AI initiative, the number of vendors are shrinking or flat.

7:30It's harder. Your job is harder. So you're only going to get tailwinds if you're in one of these two groups, okay? we'll show you this one this is a version the first one interestingly feels like unicorns are back with a passion and then decacorns and centicorns are even more of but it's concentrated it's almost as much money in dollars but not deals and ipos man i don't know how many guys listen to the podcast that we've done with harry and rory for about five or six months when we started doing it, the IPOs just started to come back. And then we had Figma, which rocketed 4X, right? I haven't checked today, but Figma's back down or below its IPO price, despite incredible growth.

8:17Klarna IPO got out, I think it's down 48 % as of today from its IPO. So all this great IPO energy that we had that kind of culminated in Figma, but there were others. A lot of them are still up and some of them like CoreWeave that are AI related are still strong. But they're all down from their peak and IPOs are ending the year, unfortunately, with a whimper. With a whimper. We didn't open up the floodgates for IPOs. And it might've felt like that on social media. But the reality is it's not going to make it any easier for most folks to go public. It is what it is. It's life as founders we roll on.

8:48It's been worse, but this was not as great as it seemed for IPOs. And then the last one here, and then I'll dig into the data. But this is the tough one. It's almost a paradox and it's literally never been easier to scale to a hundred million quickly as ever, but only for a select few only for, again, listen, there were crazy, there were, there were the crazy hoppings that went up and down. There was the zoom hysteria. There was a lot of, a lot of stuff that happened in 2020, 21, but, but we were more on the same journey then. and a gamma will already went from zero to a hundred, one to a hundred this year.

9:32Replen and Lovable, one to 200 million already this year. You know, I'm a small investor in a video app called Higgsfield. I just thought they'd get a million dollars on Black Friday and already got to a hundred million this year doing video. And they have tons of competition. I mean, it's a great app. I love this app. I've been a user since day one, an investor, but it's not, they don't own the market. I mean, it's one of the best, best teams, but already a hundred million this year. So if you nail this AI product market fit, this two by two, literally in our lifetimes, it's never been easier in air quotes to get to 100 million to super cycle.

10:05But there's so much competition. Folks are getting cloned so quickly. And there's a friend of mine at a company I invested in here that's totally awesome. AI, very disruptive. I think launched about 60 degrees. It has four clones already. None of them are as good. But again, we talked about a little bit this morning. It's just faster. Everything's faster. So it's faster than 100 million, less stable and more concentrated. So you could say, woe is me. You could stare at your shoes. You could blame the economy. You can blame everyone else for raising prices. Or you could figure out what the F everyone else is doing and go get a little.

10:45Your job is to get some of that, to go get some of that. And frankly, if you didn't accelerate growth at all this year, you'd get a D. because you had a year. You had a year. I give everyone a pass for last year. I give everyone a big pass for 2023. All these tools were kind of terrible in AI. No one gets a pass this year. You saw it coming. You saw it changing. You saw these agentic tools getting better. If you didn't re-accelerate and you weren't in market with a great agent, a great agentic product this year, you get a D minus, but you don't get an F because you got through the year. But you can't get a D next year.

11:22it's you're late so this is your job to go find it right find the tailwinds okay so let's dig in it's the whole presentation if you want to leave now go do something more interesting you can okay now i'm just gonna just gonna dig into some of the numbers you don't have to say or you can ask questions afterwards but just to show it visually these are some charts from saster and and these two i i regurgitated from crunch space but it'll kind of show you um i didn't have that We just ended in November, but October 2025 was the highest, on the right, the highest valuation total capital raised by new unicorns in three years.

12:00So you get it. We're not quite back at 2021 peak for dollars into unicorns. I think we will be next year, but it's a number two. But look at the left. The deal count's like a fraction of what it was. The deal count. This is just a visual representation of the concentration. The money's going back. So many investors that I've known over the years, so many actually classic SaaS and B2B investors that used to do seed and net, they're doing Anthropic at$80 billion,$100 billion. They're doing Ramp at$32 billion. These used to do A deals. And why are they doing this? Are these stupid people? No, that's actually where the easy money is, right?

12:41I mean, it just said today, Anthropic's going to raise at$300 billion. So if you were a VC and you invested at just$60 billion or$80 billion, you're looking like a genius rather than investing in some new startup at the A stage. And you're just hoping your money doubles in two years. Like it's just, I know it's air quotes, but it's where the easy money is. And not only is it easy to get, if you get into an anthropic or whatever, not only is it easy to see your asset appreciate on paper, it's easy because there's liquidity. You can actually sell your shares and it's easy because, and here's what's happening in venture.

13:11You can put so much money in, right? It's great if you put$5 million into a startup at$50 million and then it doubles to$100 million, your$5 turns into$10. That's great. The profit to the whole VC firm is 20 % of that$2 million. If you're able to put$100 million into Anthropic and it triples, right, then you've made$40 million for actually less work because you didn't have to find the company from scratch. So it's less work to make 10 times more money. That's just math today. and you're seeing it here. And so if you talk to investors here or you listen to the podcast that we do with Harry and Rory, what you'll hear is, and you'll see it if you're an investor, most startups are not doing great today.

13:49They're not. But the ones that are really breaking out at this crazy level, the investors are just frothing at the gums to put more money in. They shove money down founders' throats. It's just because there's no ceiling to the best of them. Anthropic isn't topping out in a billion. OpenAI isn't topping out in a billion. and they're topping at a trillion. And so you can just shove so much money into companies now. That's the game today, you see. And you just got to be aware of it. It almost seems silly to do early stage investing. On our pod, we say seed is for suckers. It's resonating. It just seems so silly when you can just put the money into a late stage unicorn, a AI company and it quintipples in a year.

14:31One year. One year. Why would you do anything else? Why would you struggle to find a startup, meet the founders pre-revenue, figure out if their 3K of MRR is going to go to 30, learn the competition. Why would you do that if you could just invest in a leader and have your money quintuple? You could argue that it may come down, but if you look at all the data, it sure doesn't feel like this AI super cycle is going to end next month or next quarter or next year. So don't expect venture capital to change. And so don't expect, I've said it a lot on the pod and others are talking about it. Don't expect the classic triple, triple, double, double startup, which is hard to do in B2B.

15:08Don't expect it to get more attractive to most VCs unless you're doing even better because it doesn't make any nothing. If you think it's just a hard way to make money. We're all kind of lazy. We're all kind of lazy. Like we're not all super lazy. You're here. You came here, but we all want to find the fastest path to A to B. You know, VCs at the end of the day are like sales reps. They get a hundred leads, but one of them's a million dollar deal that's going to close in Q4. Where are you going to put all your time? All your, you put 80 % of your time just standing around, waiting for the email.

15:37Did it get e-signed? Okay. This is a version VCs are doing today. It's just, it's the easy money. And this is just a different one. I took this from Excel's recent analysis. It's up on Sastr. This is another way to see it on the right, which is that total VC dollars in are projected to be about the same in 25 as 21, according to Excel. And that's great. Excuse me one sec. So in a sense, we're back, right? And again, I think 26 will be even bigger. So we'll surpass the dollars of 21. But look at the top four deals are taking half the money. Again, Anthropic, X.ai, they're just absorbing so much money because you just put your couple hundred million bucks on the table and you double or triple down on a lot of money.

16:25They're just absorbing so much money, like overall dollars back. But again, it's into less, less than half the companies, right? It's the rest of the money is only going into half the company. So a weird, a weird market when 59.6 % of the model companies are taking all the money. Okay. We kicked this one. Actually, I just made this slide like a week ago. It's gotten worse. It will get better, but this is the IPO story. So just because ultimately, listen, one of the great things about being in a startup is you can kind of ignore a little bit of the externalities. As long as you have runway, as long as you have time, you don't really have to worry about where NASDAQ is today.

17:07You don't really have to worry about IPOs. It seems a while away. Startups are harder than big companies, but in a way, you're in a bubble. And it's kind of comforting to just be in your lane. And just like the competition is killing you. You don't have enough people. But at least you don't have to worry about all the externalities. But this is, again, I saw this one from the Excel analysis, Excelscape that's on Saster. IPOs came back, but not much. Okay? So there was a point in 2021, the peak moment, I forget when it was, when it was an IPO a day. Okay, it obviously wasn't the whole year. It would have been 365, 46.

17:44But it was an IPO. Actually, I think it was an IPO outside of tech. This was just software and AI. So it was an IPO day in 2021. And then HashiCorp was the last one in December of 2021. And then the door just slammed in 2021. And it was actually really weird because if you were in the market back then, 2022, things were actually great for business. Like people kept buying software. In some cases, growth came down a little bit. 23, it started to get hard to sell the same old boring B2B products. It was still easy in 2022. But man, the IPO market slammed shut at zero. Zero. I don't see any zeros going back for more than a decade.

18:21That was a crummy year for tech IPOs. I don't know what happened in 23. 24, oh, was 23 Klaviyo? Maybe Klaviyo's not on this. Did anyone know what it was? Was Klaviyo 23 or 24? Might have been 23. Klaviyo came out of nowhere. It's the hub spot for the Shopify ecosystem, hub spot pre-commerce. Great company, 1.2 billion in revenue growing, I think almost 40%. They IPO'd and then we had a few in 24. Rubrik and Service Titan were great ones. one stream, an interesting small one. And then it seemed like it was coming back in 25, but maybe we'll end the year at nine or 10 in tech. It's not that much.

18:57And worse on the right, again, this is a couple of days ago. This is the performance from the peak. So from Figma, which is for many of us, probably the best one on the list, 74 % down from its peak, Jai minus 30, Karn is even worse, it's 47 % today. so like if you're if you're a public market investor now listen only so many people buy at the peak right but this doesn't get you excited does it it doesn't make you like froth at the mouth for another 10 ipos or 20 ipos next week it just puts a damper on the market and so we just have to adapt that 2026 might be a banner year for ipos 27 might be but we the data didn't end up being so great, like, like we might've thought it was mid-year.

19:43And this one's a tough one to internalize. This is by, if you talked in the, again, ventures, ventures, very important, but it's a very small slice of the world. But this is a tough one that I don't have a lot of answers to. Today's about a lot of answers. How do you do AI SDRs, BDRs, AI, RevOps, uh, scale your team. We got a lot of answers here. This is the one that's tough, which is that because the new AI companies are growing so quickly, the winners are getting younger. The winners are getting younger. 65 % are zero to three years old. Now, it's not universal. On the right, I took the screenshot from Lovable.

20:21One year to 6.3 billion, right? Seems pretty crazy. But I use Replit. They're both great. I actually don't really have a horse in the race or an investment. Replit actually, I think, is almost 10 years old. And I think it was six years old as an IDE. And then it was around and its timing was perfect when Claude 4 and everything worked and it blew up equally as well as Lovable. So not everyone is the new kid on the block. There are plenty of folks you've heard today. And for every Lovable, there's a Replit or Gamma that was around for a long time. And then AI worked and it blew up. But overall, the kids are younger these days.

20:55Not just in age. There's some truth to that. Certainly to go like to Ycoma or in the Bay Area, you meet a lot of 18-year-old, 19-year-old founders dropping out of Stanford your first year is seen as very cool. It's a change, but really it's that the companies are so young and why is this kind of a bummer? And it's great if you, if you did the lovable around a year ago, right? But what it means is, and maybe this isn't all bad. If you've been doing this for a while, your VCs are just going to check out on you. They're just, it's just not again, like putting all your money into Anthropic. It's just natural.

21:29If your company's around six, seven, eight, nine, 10 years, and you're looking at this chart, you know what your job is as an investor? Go find the next lovable. Go find the next lovable. Now, it's not all bad, okay? The flip side is, if you're older and you're not a rocket ship, your VCs probably just don't, your investors probably mostly, at least in the US, they just don't care anymore. Do whatever you want. Make a little bit of money, run the company how you want, grow 30%, 60%, 10%. As long as you don't need more money, more power to you guys. So I don't see, you know, pre-2020, I think when growth slowed when you were older, VCs would get agitated and they'd have meetings and they'd talk forever and maybe even talk about bringing in a new CEO or something.

22:09I haven't heard anyone in years talk about bringing a new CEO into a venture-backed startup. They just stopped showing up. I'm a little, first I'm like, can I do the board meeting Zoom? Then they moved to Zoom and they're just there. and as long as you don't need it like to me when i was a founder i took all this stuff personally i still take it personally today if you don't take it personally it might not be a negative you might have some freedom but just be aware when you look at this chart it's just natural as an investor not just to chase the shenny object we're all human beings but it's just where the money is today for now today it's not that long tail and so it's complicated it's complicated.

22:50It's also complicated for the thousand unicorns from 2021 that maybe aren't quite growing at the Figma level because if you go back for a second, Figma's down 74 % from its IPO high. You know how many B2B companies are better than Figma? Like approaching nuns, okay? Like very few. So many of the unicorns in the pipeline are very, very, very good companies. They're just not quite glowing at the rate figment did at a billion who is going to be excited about them unfortunately it's got to be you you've got to find your own excitement because your investors and the markets for the moment are not going to be excited okay let's come back let's let's dig into this dichotomy this is the latest gartner report i can find folks sometimes make fun of gartner don't don't because yeah sometimes it's it feels kind of like a scam when you have to pay for the to show up in the report and everything.

23:48But honestly, I don't know anyone that talks to more CEOs and buyers of software than Gartner, okay? Are their predictions always off a little bit each year? Yes, but so are mine. Even a lot of your plans on 1231 were not exactly where you thought they'd be at the end of the year. No one talks to more buyers. So I think the trends and the rough data they see is about as good as it gets, because they talk to the most. And this is pretty crazy. Software spend slowed for a while. and re-accelerated in 25 because of AI to 11.9 % at 1.2 trillion. That's a lot. Okay, that's a lot. That's not growing 12 % at your ARR, okay?

24:28This is an insane amount of additional buying, okay? And they're predicting it's going to re-accelerate to 15.2 for software, 9.8 % overall for IT. That's a lot because for a million reasons, including the fact our overall global economy is not growing this quickly. Right. So we're going to put more and more of an ultimately a fixed amount of revenue in the world and in, in companies into software and into technology. That's the good news. This is a lot 11 to 15 % of this level. That's an almost unprecedented level of additional investment into software. That's the, is unless you do something and get any of it.

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25:10Okay. So let's, let me, I tried to summarize all the leading analysts. ISG, 30 % of the budget increases into AI. Deloitte's in 36%. McKinsey came a low at 20%. That's still a lot. BCG, Boston Consulting Group. AI is the number one being reallocated from other categories. Gartner, top one to two priorities across almost all its CIOs. They're saying their incremental budget, though, is only going up 2.79%. and they're budgeting 9 % price increases for next year. 9 % price increases. So what does all this mean? You've got to steal this budget from some of these people. You've got to steal it from other AI need them.

25:50We got to be a top free AI initiative or steal it from the price increases or you're not going to get it. So I said, steal or be stolen, it's up to you. But you can't just stand around like in past years and build a great product. A great product that optimizes workflow, that has an ROI calculator on your website, that makes your team more productive, there's just no frigging budget for it. Okay, AI is about more than being productive. Ultimately, it's about replacing or augmenting humans and delivering relatively rapid and massive ROI, much more than traditional workflow and database software.

26:25So you either got to be in this game or the budget's going to be stolen from you for price increases and to free up money for AI because there's always so much.

26:36so here i collected it a little bit just to show it to you in a different way even though spend into software is going to be a right was a record this year growth of 11 and 15 next year at this scale at over a trillion the average public cloud company's growth is coming down you know this but it's worse than this because they're not grabbing the budget palantir is securities. Other things are going well. Klaviyo is tying to the great growth of e-commerce as a Shopify. Figma's got some of it. These are the winners. These are the like five of the top winners with the best AR multiples that are public companies.

27:17But overall, we kind of get a D minus. The leaders, the public companies get a D minus for this year too. It's not just a few of us. A D minus because they didn't tap into all that great budget. Where's that acceleration? You see Even this chart, I don't see any of it. I see consistent deceleration. There are examples. MongoDB tapped back into it this year. They re-accelerated. Even Twilio came back a bunch. But no one really crushed it. They let all this money go to newer entrants. Okay? It's more power to our investments and our friends that made money from it. But pretty bad job by incumbents.

27:53Not just some startups and unicorns, but the Pupco. There are some exceptions. obviously snowflake databricks on the private side palantir is crazy but we really didn't get it all and so you got to do it next year and i just kind of know this but i wanted to break out actually if you go to saster.ai our newer site not.com we're still maintaining both we can talk about it if you want but we have market data where we pull all these top companies and we show you exactly what's happening every day if you want in real time you can even get a real-time newsletter We show you multiples. It's just for B2B.

28:26It's pretty cool. So I literally just copied this from saster.ai slash markets. And we update this every day live. But it just, so not only are we sort of in an AI and non-AI world, in many cases, in B2B, like there's this massive multiple divergence in today's world. Now, this has always been true. Faster-growing companies are worth more than slower-growing companies. But it's just, it's very divergent. say so these are public companies um you've got to scale these numbers up for startups all these small companies have to grow faster than big companies all things been equal but if you look at the left if you're in the top bucket the ones at a billion plus that are growing 30 rubric palantir figma and others figma is actually the low trader in this group they're still trading at 23 times ar that's pretty damn pretty damn good now it's kind of palantir warps it as just rubric a little bit, but the growth, but they're growing 43 % as public companies, public companies.

29:26That's a lot at that scale. The boat, actually the ones in the middle are holding up surprisingly well. The ones that actually, we saw a lot of deceleration, the ones that aren't decelerating that are growing 24 % are growing almost, are almost 12 times ARR. That's a pretty high multiple. And then you're just getting flushed at the bottom. You're getting crushed when growth is less than 20%, 4.9 times ARR. I wrote up PagerDuty this week, growing 4 % and now profitable, trading at two times revenue, 500 million in it, worth a billion. Eventbrite today, I think, sold at one time revenue to Bending Spoons.

30:03Okay. So like the markets, the public markets only expect pretty good growth. And actually it's, you get a great deal. You actually don't have to grow at 2021 rates to get really high multiples, but you've got to grow. This will help you triangulate the buckets. It's huge premium for growth. If for some reason, even after this year, you think being profitable is enough, it may be if you're bootstrapped and you're making a lot of money and put it in your own pocket, if you're Valve or someone like that, and you're bootstrapped and you just bought yourself a$500 million yacht last month, more power to you, right?

30:37I don't know whether it really matters how much steam and valve grow when you're making$4 billion in profit a year, four or 5 billion, six, I mean, you want to grow, but maybe 4 billion in profits enough with 300 employees. Okay, I don't know. But most of us are not like that. We have to grow. And so, listen, a lot of folks had to cut or get fit because their runways were shortened. They can't raise another round for the reason we're talking about. But profitable is not enough unless you're utterly insanely profitable like Zoom. For every dollar Zoom brings in, 50 cents goes to the bottom line.

31:08Okay, pager duty and others don't do that. You've got to grow. And otherwise you're going to be worth 2x like pager duty or 1x like Eventbrite. You don't want to be in that box. You just don't want to be in that box. massive split in valuations. Here's another one that looked good at first. If you didn't dig in, this is from like a week or two ago. Adobe trying to get into the AI game on the marketing side buys SEMrush, SEMrush, because they wanted to be into GEO, LLM optimization. So even though SEMrush is, it's actually Bootstrap, kind of a cool story. Even though they're older, they do have a lot of good instrumentation to sort of series show up in the LLMs and chat GPT and Claude and all that.

31:47And Adobe needs something today because actually 30 % of Adobe's revenue is selling to marketers. It's not Creative Cloud and others. It's the whole marketing, more enterprise side. So they buy them for 1.9 billion. Sounds like a lot, but it's only three times the next 12 months sales, even with a huge premium. This is the pale, because when you buy a public company nine times out of 10, you have to pay higher than the public stock price or most folks won't sell. Like even with Eventbrite selling at 1x today, I think it was still like a 50 or 60 % premium that Benning's Spoon said to me. Otherwise people just won't, they won't fill in their proxy form or sign the deal.

32:19So even with Adobe paying a huge premium, it's only 3X revenue. No, we don't want to sell for 3X revenue guys. Okay. We don't want to do it. So there's just a split in valuation for growth. Can let me summarize a couple other things. And, um, I know this scene might seem obvious to some folks, but I still think 90 % of folks don't get this. Even if maybe don't get it. That is the wrong thing. Maybe they want to believe something that isn't quite true that they want to believe folks I've talked to here today and yesterday. They get it. They're here. They're obsessed with AI from B2B. And, um,

33:01they're a little behind. They didn't build gamma or repli or, or whatnot. and they want to build a co-pilot. They want to build a little AI that makes your product better. And listen, those are great. And all of us should have a co-pilot. I personally, honestly, if there is a B2B app and I can't talk to the app and solve my problems, if I have to like figure it out from a clunky UX or like a help menu, I don't even want to use those apps to 125. I want to talk to the app. I want the app to tell me how to use it and be better. But I'm not going to pay you two or three times as much because you have a cool co-pilot or a nice chat.

33:34That's not enough. it's not enough. Like AI features don't count. They're necessary, but not sufficient to grow. And we just, I don't want to pick on PagerDuty, but 500 million, only worth a billion. Look at PagerDuty's website right now if you want PagerDuty.com. It says AI all over it. They've got AI monitoring, AI uptime monitoring, AI this, AI that. It don't matter. Unless you're replacing a large part of DevOps humans with AI, it doesn't count because there's no extra budget. So where is this budget coming from at the end of the day? I break it up into three groups. And which one are you?

34:10A co-pilot is none of them. A feature alone is none of them. Where do you get this budget? The part that Gartner is talking about. Replacing humans. It's brutal, but true. You know, two things took off quickly in AI. Software development, we all know Cursor at a billion and all the rest. We could talk about it if we want. But also, if for some reason you don't follow it, you probably do. Contact center blew up. Support. You know, the existing investors, Zendesk re-accelerated even though it's private. Sierra went from nothing to$100 million in one year. Decagon, lots of others. Intercom was just here.

34:44Finn, their AI product's at$100 million right after the company growth. So we just took them the chief product officer today. And is it because the AI is cool? No, honestly, they're cutting half their support teams. You know, Mark Benioff said even at Salesforce, they're growing. They're adding more headcount in sales and marketing. But I think he's, I know the numbers, I think three or 4 ,000 folks in support, they already replaced with AI and their own AI and support Condeasian Force, but that's thousands of humans. Now they reskilled some and moved them into other apartments and moved around the head count.

35:14Salesforce is investing. That's a lot of change. Okay. And people didn't buy this AI support software because it was cool or because it was a co-pilot. They bought it to get rid of head count. And that is going to accelerate next year. And there's, if you can, if you can get rid of a hundred million effect, there's probably room for a couple hundred thousand dollars a year of your tool. Okay. Two, and these are different. If you truly augment humans dramatically, I should have put dramatically in the color, not, not augment humans dramatically. You know, I don't know how many folks here use cursor.

35:49Okay. Now for similar, right? I mean, I'm more, I'm not that I'm not technical enough. I use Replit, but it makes you so much more effective. So much more effective. If you guys haven't used any sort of vibe-coding tool or cursor or for non-technical folks, rapid or lovable or something, you might not get it. Even in May, when we were at SaaS for Annual, the idea was, oh, I'll make my developers 30 % more productive with these tools. Like, okay, I'll spend a couple hundred bucks a month, maybe 500 bucks a month, and they'll magically be more productive. They'll just create more features. and there's truth but it's much more than that like if you're deep on cursor or other tools you're never going back it fundamentally changes the way we build software like cursor and all these other tools are up in level have ingested every piece of open source and probably a lot of closed source software if they have all of it so anything you want to build that has been built before can be built in minutes or moments so i don't know if you're yesterday i yesterday morning I built a game called VaporSale.ai.

36:58Try it right now. It's super cool. It's got cool music. You sell a product that should exist, but doesn't. You've got to convince prospects to buy something that's AI and trendy, but it doesn't work. It's kind of a fun little game. I mean, I built this in one hour. I actually built it in less. And why? Because honestly, it's just stealing someone else's code. It's got a fresh skin on it. I gave it the right prompts and the right ideas, but it's already in the code. And so why would anyone go back to like writing this code from scratch? Like you had to do a year ago. You wouldn't write. So this is radically augmenting humans, these types of tools.

37:35I mean, you, you know, yourself, even if you don't chat, GVT or cloud, you're not going back, right? You're not going back. So, but this is radical augmentation. Or three, an incredible level of productivity. So when we, when we talk about our stack, we talk about a bunch of these, but like, and I don't mean to keep going back to the well, but like we use gamma to make all our sales collateral instead of Google slides or PowerPoint. It's not like a little bit better. Like in five minutes, it pulls all of our data from our CRM and otherwise, and knows everything about the prospect. And it creates a beautiful dynamic presentation, completely customized to them in five minutes.

38:09And we pay a hundred bucks a month. That's like one of the best deals on planet earth. We're not going back. But most folks, classics, they're just not going that far. They're only making their products better. I'm sorry. That was enough in the old days. It ain't enough. You've got, this is where the budget is. It's not enough for AI to make your product better. You got to replace humans, turn us into like cyborgs. I guess I'm going to rename section two cyborgs. I'm human AI hybrid and quad or replet. Maybe even Harvey, arguably we're hybrids, right? We work together. More insane productivity.

38:48Order of magnitude, more productivity for. Honestly, sit down and ask yourself, are these the tools you built this year or did they just make your product nicer? If you did, if you've spent this whole year building AI tools for your BD product and you didn't see any additional growth, I bet you're in the fourth bullet and not, and not the first three. Okay. Another way to think about this. Maybe this is my penultimate point. People call this a super cycle. VCs call it a super cycle. Why is this a super cycle? This is an important point. I've talked about this a couple times in the 20VC pod that we're going to do live in about an hour.

39:33But this is why you've got to be in market with an AI product A &B because everyone's in market at the same time. So why did SaaS blow up in 2020 and 2021? right it wasn't just that for a few months everyone worked at home okay it wasn't just that because half the u.s economy was essential workers half of the folks still had the same jobs they still went to starbucks they still went to the hospital and they still did all these things and that ended in a lot of red states by the end of the year okay i was split i don't know about you in 2020 i was split between blue and red okay i'm not political okay up in the barry it was it was like a sci-fi post-apocalyptic thing.

40:17Half the time, because of family reasons, I lived in Orange County in Southern California. It was like, didn't that happen? People were playing, taking school buses. They were eating inside in restaurants, even though it wasn't even allowed. But what happened wasn't just this. It was what drove a thing where everyone who was in market at once, every enterprise decided they needed these tools. Every enterprise, there was so much change. They needed a contact center where you didn't have to come to work for a while. They needed e-signatures. They needed zooming was the most crazy one. They needed all of it.

40:47And what happened was instead of the traditional 5 % to 6 % of prospects being in market a month, which is a way a lot of marketers think about things, right? I'm going to try to reach everyone in my universe, but the only 20 % are really in my ICP. And of that 20%, maybe 4 % to 5 % to 6 % are in market, right? So if you start doing the math, you're lucky if 1 % of your list, your database actually is going to buy this year, right? Because you think about how many folks are in market. because if your tools are working great, it might take five or eight years to even decide to switch them out. Back when I was at Adobe and we moved to Salesforce, it took Adobe five years just to move to Salesforce, a big company.

41:27How long would it take you? They're never moving off, but if you were going to move off, it would be like a decade, right? So folks were rarely in market, but in 2020 and 2021, everyone was in market. Now it's happening again with AI. And some of it is productivity, but a lot of it is just, you know this from your customers, CIOs on down have a massive initiative to drive, to bring AI innovation to the company and have massive productivity gains. And so everyone's in the market, but you've got to be a need, a need. And I just kind of wrote this up to myself. I need, we've heard this today. So many sessions, so many folks I've talked to, they need an AI GTM tool.

42:00Do they really need it? Will their companies die without it? No, but they want a clay or qualifier artist or other folks you've talked to. They need it. They'll find it. They want to bring this tool and I need it. I need AI support. We talked about it. I need AI legal review. I need AI coding. I need AI security. Not only a rubric in Instagram, we had a keto security this morning that's blowing up because they need this for AI. So are you this? Are you one of the categories of products that buyers feel right or wrong? Just like maybe we didn't really need all these products during 2020 and 21.

42:33The world, with hindsight, was more normal than we thought. But do they feel like they need this product right now? If not, you're not going to get any budget. So how do you see I need this for AI? That's what you've got to build in the first half of next year so you don't become obsolete.

42:54Another couple points why some of the best ones are blowing up and why others are struggling. The best B2B AI enables TAM expansion. TAM expansion. So a lot of those public companies, they've reached ham saturation, often because they're only single product or double product. They don't really have a suite. They can't build as much as Datadog. They can't build 12 products or 20 products. They've saturated. They've gotten to double digits of their market. But because the best AI products do so much more, they can charge more. So Gamut,$100 to see, which our PowerPoint AI tool, like$100 is not that much money compared to a lot of insurance, but it's a lot more than Google Slides or Canva, which are basically free.

43:40We already pay for G Suite. It's free. You may already pay for Office. That's free. Can you get everything for like$9, okay? And we're still paying$100 a month. That's a lot more too. Cursor at all, Cursor, all the rest, Windsurf, all these other tools. It's so much. Think about it for a minute. Atlassian got incredibly successful selling Jira and other products for five bucks a month with discounts to folks at companies. Now folks will spend$400, in some cases$5 ,000 on Cursor. That's why it goes to a billion. It's so much TAM expansion. It is so much more than a project management tool or a bug tracking tool.

44:24It is so much more TAM by that productivity. And we've talked almost ad nauseum here about AIS, DRs, and VDRs. These products ain't all cost a lot more than one seed themselves of HubSpot or one seed of Salesforce or one seed of Zoho CRM. I mean, do you know any CRM that costs 50K to 100K a year? I'm slightly exaggerating. It's not really one seed. But these guys are blowing up because the products unlock huge TAM expansion. huge cam expansion by replacing a lot of humans a lot of sdr and none of these guys would be remotely as successful if they had to charge like traditional sas companies you know if all these folks out here had to charge five bucks a month like notion they wouldn't be here well some of them they couldn't afford to be here they couldn't afford to fly anybody out or come out here because of tam expansion and so this is the way the game has changed and so if your co-pilot isn't really letting you charge more for your product.

45:23It's not because your sales team isn't good enough or your product marketing. You don't have the right gerunds and vowels and colors on your website or the right fonts. It's because you added so much value that you unlock so much TAM. So much TAM. Some of these guys, their software is better than you, but it's not like they're so much better at sales and marketing than you. They just unlock so much TAM. So you've got to be honest. does your AI product for 2026 enable you to charge five times or more than what you're charging today? And earn it. Not shove it down people's throats, but earn it. Earn it.

46:01That's the unlock here. Charging for your co-pilot that no one wants. Microsoft learned no one wanted to pay an extra$20 a month to talk to Word. Okay? That was a great innovation. And even Microsoft couldn't get people to buy that. Okay? It doesn't work. No one wants a mediocre co-pilot. And a couple more points. I'm talking about 2026, because even though, listen, you guys all get a pass. We all get a pass. But even though some folks are getting D-minuses or Cs for this year, I'm sorry to be direct. I'm just trying to be helpful with love. It's all said with love. There isn't infinite time. But there's still time.

46:38We are early here. I don't know if we can all catch Cursor. Okay. Might be a little late. But there is time. I picked two examples. Clio, Jack Newton, old disaster OG from the beginning, legal tech. Really, they added FinTech into work for him and they raised a$3 billion. And then they added AI to their product in the last year in legal, for legal case management,$5 billion. Founded in 2008. 2008. Gal, I've talked to her too much, but founded in 2020. Didn't really work before AI. now a hundred million and with just 15 employees. And there are a few of you who probably no one here, you wouldn't have come.

47:20There are a few of us in the broader SaaS community that have already lost to so-called AI native folks. You've lost the game. Woe is us. I don't think it's true for most folks. You have time. You don't have infinite time, but it's early. It is early. What I can tell you, the Salesforce team is here with Asianforce. what I've learned and, and, uh, is that learned it from Mark and lots of others is like, yeah, there's a segment of Salesforce's 44 billion of AR or whatever they're at that needs these tools tomorrow. But a lot of the traditional industries haven't even started, right? For I'm not telling you to go buy public stocks, but I'd be long on Salesforce, even if the market wasn't true this year, because it's just getting going with the spike.

48:02The demand is just getting going. So find, Like don't go and directly compete with the folks that already get a couple hundred million this year, unless you know you're on a better engineering team than them, but so much of this is still early. So many folks are found their wind this year. This should be you next year. It is not too late, but eventually if you don't catch up with your agentic product, with your native AI product, and you don't catch up next year, your direct competitors will, and then you will lose market share. You will lose market share. And the one thing, the honest thing to ask yourself, and if your founder is maybe not even to share with below your management team.

48:39At the end of each year, you have to be honest. Did we gain or lose market share this year? Did we gain or lose market share this year? Even if you grew 50 % this year, if your competitor grew 100 % and you're at the same AR, sorry, you lost this year. Okay. Did you gain market share? Every year that's important, but in the world of AI, it's even more important because it can sneak up on you. Be honest. There was one startup I worked with that has just crossed a hundred million. Pretty good year, pretty good AI product. Couple of quarters ago, they started deleting the competition slide from their board deck.

49:12Where in the first, first time it was a hidden slide, you know, went from shown to hidden slides and then it disappeared. Why they weren't gaining share anymore. Okay. Now I've kind of gave the CEO a pass. I brought it up between me. I wouldn't bring it up in front of the team. If you're not honest about gaining share, you won't gain it next year. You'll lose it in today's world. So ask yourself honestly, figure out who your direct competition is. Find a way to track your share. Figure out their era. Figure out their growth. Go on the internet. Figure out every metric you can find out. Number of customers.

49:44Scrape it. Use tools. Even if you have to use web traffic as a crummy proxy. But make sure in the age of AI you are gaining share and don't hide behind it if you're not.

49:59Okay, maybe a couple other paradoxes and then we really will wrap. This is just a trend to think about as we, for 2026, it's complicated. Leaner teams are real. Now Gamma just said, I'm not, I'm going to Gamma, but I just noticed in the last, you know, 2 billion valuation, 100 million ARR, 50 employees, Lovable and Replit, both under 100 employees per se, I think. It's a little bit confusing, but whether they're under 100 anymore, they were under 100, they'll be under 300. These are very lean teams, but some of them have 100 % inbound, dramatic demand, and no sales team. So if you have no marketing costs and no need for a sales team temporarily, and you have one product, you can actually be pretty lean.

50:46One product, no sales team, no marketing expense. It is easier to be a little lean than a traditional B2B company. But everyone is getting leaner. And this isn't about layoffs or just getting more profitable. Because as we just talked about with PagerDuty and Slow Growth, just being profitable isn't enough. It's not going to give you, you know, selling for one times your revenue is not worth it. You've all worked too hard to sell your companies for one times revenue. So this isn't just about getting fit. 2022 and 2023 was about getting fit because now you can say this without getting your head cut off.

51:20We were way too, we were, we had way too many employees running around in 2021 doing nothing. We had too, way too many marketers spending 90 days doing an infographic. Okay. We just were, everyone was bloated. Okay. Everyone was bloated. There's a million things going on now. Some of it is replacing humans with AI. Some of it is, is other things, but we're just all going to get leaner and leaner and leaner in in terms of employees, ARR per employee. It's not gonna reverse itself. There is no trend to reverse itself. So the new guys are getting more efficient, but everybody is essentially getting much more efficient.

51:54What there's a little too much chart going on on the right. It's showing up more in early stage companies and late stage companies where there's more boat, but it's still happening. And then just briefly, I don't wanna go too much into this cause we've had a lot of time. I guess I didn't need the whole hour, But a weird thing being, this is just this term on the right. I've talked a little bit about it before, but it's something important to not be too, not accidentally be arrogant about or pat yourself on the back. Yes, are a lot of AI companies burning a lot on tokens, burning a lot on inference, burning a lot on AI?

52:33Yes. But, but their burn multiples are lower than traditional companies because they're growing so quickly. Now, you've got to keep that wheel going. But if, oh my God, you're like, oh, you can make fun of this AI strap. Those guys burn a million bucks a month on inference, okay? That's not sustainable. Their margins are 40%. Yeah, but if they added 50 million of ARR, it's wildly efficient. Okay, if they slow to 10%, you get crushed. But another almost paradox, the fastest growing AI companies are burning more AI and their gross margins are lower, but their burn multiples are also lower because they're adding so much revenue.

53:10It's worth it. It's worth it to win this AI war, at least for the next couple of years. And here's two versions of this. Here's HubSpot and Salesforce. Obviously, probably every single person in this room uses HubSpot or Salesforce, so I picked them. Since 2021, this is their efficiency ratio, their revenue per employee. HubSpot up 2.6x, even Salesforce up 2.2x. Microsoft, old Microsoft has passed peak employee and is coming down. Not only is Microsoft's efficiency going down, its absolute number of headcount is going down and trending down. I mean, it can't go down to zero. I mean, Microsoft's a pretty big company.

53:47It's not just the startups. It's not just gammas and cursors. Everyone is getting radically more efficient. And what that all means, how you all do it, I don't know. But this is not, again, this is not about layoffs and it's not just about agents. This is just how we're building software today. We're building it radically more efficient. and honestly, the toughest thing, the most honest thing I can tell you for 2026 is if you're going to 2026 and you still have folks on your team, and I still see this at startups, and you want them to double next year and they need to triple their team, move on from that executive.

54:21If they want to double next year and they need to increase their team 50%, sounds good to me, okay? I'm still in too many conversations where the excuses I hear from CROs, from CPOs, from CMOs is I just don't have enough headcount. like these are companies that are not that efficient they're not running out of money they're not that efficient and why aren't you growing quicker well i need another 100 people i need another 200 people i need another 40 product managers and another another 30 people on the marketing team just kindly thank them give them a package and move on for them it's not the world that is the past they're still living in the past so my summary and then we will break the growth is there gardner says it's gonna be record software spend next year almost record total IT record software spend and reacceleration.

55:05It's going 50 % faster next year. Software spend. That is an epic amount of dollars to go capture. Hundreds of billions of dollars going into software. There's hundreds of billions of new revenue. Can't you get a little bit of a hundred billion? You don't need all a hundred billion. You just need like some millions. It really is surrounding it. So the dollars are there. This is the best of times, but not for all of us. It was the best of times for almost everybody in 20 and 2021. Almost everybody. It really was. You just needed a CRM, a call center, a support desk, an e-signature tool, and you were a genius.

55:48It's only for the AI beneficiaries. So guys in 2026, B1, thank you.

55:56Hey, Sasser, imagine having agents for every support tab. One that triages tickets, another that catches duplicates, one that spots churn risk. That'd be pretty amazing, right? HappyFox just made it real with Autopilot. These pre-built AI agents deploy in about 60 seconds and run for as low as two cents per successful action. All of it sits inside the HappyFox Omni Channel AI First support stack. Chatbot, Copilot, and Autopilot working as one. Check them out at happyfox.com slash daster.

From the publisher

SaaStr 835: AI + B2B in 2026: Find the Tailwinds or Get Left Behind with SaaStr CEO and Founder Jason Lemkin

Software spend is set to hit record levels in 2026, but you're not getting any of it unless you change.

SaaStr CEO and Founder Jason Lemkin breaks down the paradox facing B2B companies right now: It's never been easier to scale to $100M (for a select few), while everyone else struggles. Half of all VC dollars are going into just 4 deals. IPOs ended the year with a whimper.

And that AI copilot you built? It doesn't count.

In this session, Jason shares the data on what's actually happening and what you need to do to capture your share of the hundreds of billions flowing into software.

Key insights:

  • Why "seed is for suckers" in today's VC environment
  • The 3 types of AI products that unlock budget (and the one that doesn't)
  • Why 30% of new IT budget is going to AI and how to steal it
  • The TAM expansion math behind Cursor, Gamma, and AI SDR tools
  • Why copilots and AI features alone won't save you
  • The efficiency metrics every founder needs to track in 2026

If you didn't reaccelerate growth in 2025, you get a D. You can't get a D in 2026.

🎤 Recorded at SaaStr London AI Summit | December 2025

 ---------------------

This episode is Sponsored in part by HappyFox:

Imagine having AI agents for every support task — one that triages tickets, another that catches duplicates, one that spots churn risks. That'd be pretty amazing, right? HappyFox just made it real with Autopilot. These pre-built AI agents deploy in about 60 seconds and run for as low as 2 cents per successful action. All of it sits inside the HappyFox omnichannel, AI-first support stack — Chatbot, Copilot, and Autopilot working as one. Check them out at happyfox.com/saastr

 

---------------------

 

Hey everybody, the biggest B2B + AI event of the year will be back - SaaStr AI in the SF Bay Area, aka the SaaStr Annual, will be back in May 2026. 

 

With 68% VP-level and above, 36% CEOs and founders and a growing 25% AI-first professional, this is the very best of the best S-tier attendees and decision makers that come to SaaStr each year.  

 

But here's the reality, folks: the longer you wait, the higher ticket prices can get. Early bird tickets are available now, but once they're gone, you'll pay hundreds more so don't wait. 

 

Lock in your spot today by going to podcast.saastrannual.com to get my exclusive discount SaaStr AI SF 2026. We'll see you there.

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SaaStr 835: AI + B2B in 2026: Find the Tailwinds or Get Left Behind with SaaStr CEO and Founder Jason LemkinThe Official SaaStr Podcast: SaaS | Founders | Investors · 56 min
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