It’s already clear that AI presents significant opportunities for vertical SaaS incumbents, regardless of their size.
Experienced experts who understand the intricacies of deep industry workflows have an advantage in creating new and valuable solutions.
David Yuan is the founder of Tidemark, an active growth equity investor focusing on vertical SaaS companies with outsized advantages that can become “control points” in their markets and then grow very big.
Dave and Tidemark have invested in successful vertical software companies like Toast, ServiceTitan, Jane, and CCC.
Tidemark hosts its annual VSaaS Collective Live Event, featuring experienced speakers and hundreds of vertical SaaS founders, on November 5, 2025.
Dave is seeing powerful examples of how AI is being used in his portfolio companies and the hundreds of vertical SaaS companies he has met this year.
Like per-seat SaaS pricing vs. outcome-based AI pricing, as Dave describes:
“There are a handful of examples where software companies with AI-powered solutions are getting two to five times what they got on a software seat with new outcome-based pricing. They are providing real, hard ROI that’s measurable, often associated with revenue.
“They’re only getting started because the outcomes that they’re measuring are relatively low value now, and they can increase the value of the outcomes and price accordingly.
“To capture that value, it depends on competition. Because you can add a lot of value to your customers, but you can only charge for that value unless there’s not a lot of competition vying for the same thing.“
This is a great sign for SaaS founders to aggressively experiment with outcome-based pricing when their AI features or add-ons create a significantly higher ROI.
Founders should also be watching for AI” system of action” upstarts in your market that can threaten established system of record incumbents. It goes both ways.
In our podcast discussion, Dave also shares:
- Why software companies are getting real results with AI and are not waiting for the AI revolution–it’s here now.
- How AI-powered “systems of action” have undue influence on important hero users and can potentially displace entrenched systems of record software.
- How fast-growing practical software company grow efficiently with well-timed product, channel, and regional expansion.
Check out this helpful interview with Dave Yuan on the Practical Founders Podcast.
