This month, I’ve been talking to growth equity, private equity, and buy-and-hold investors in B2B SaaS companies about their current view of AI in the companies they invest in.
Here’s what they told me:
1) AI is clearly improving very quickly, and it can’t be ignored by SaaS founders and by them as investors. But they aren’t investing in AI-first companies.
Some AI-first companies are doing great, but those are still speculative bets are more aligned with VC investing, not the more predictable, compounding flywheels of traditional B2B SaaS that private equity loves.
2) These investors/acquirers are still focused on SaaS companies with great unit economics, product-market fit, steady growth, and deep customer knowledge.
They are not slowing down their investments and acquisitions even though the AI future is unclear.
AI is already helping their practical SaaS companies with dev and GTM productivity, and useful AI-powered features are showing up in every company. It’s not AI to say you have AI.
3) Some established B2B SaaS companies are doing very useful things with AI: onboarding data transformation magic, dev productivity, creating workflows and replacing work that is very high value, and using industry-specific data to reveal insights and get things done.
4) These investors aren’t skeptical of AI tech, but they aren’t betting it all that “SaaS is dead” and that smaller SaaS players won’t be able to respond.
Most of these investors tell me they are excited about what AI tech can do to help their companies grow faster, be more efficient, increase retention, add more value, and build deeper moats around their businesses.
5) They know that the smaller SaaS players they invest in are far more nimble than the big, established players.
Big companies can embrace AI, but it’s harder for them and their big customers to adopt new AI approaches quickly.
They are focusing on businesses and founders that are responding strategically and quickly to AI opportunities and threats.
6) Every industry and horizontal niche differs in how fast AI can and is being adopted.
AI adoption is slower in highly regulated industries where “close but fast” isn’t good enough. It’s faster in industries that have a lot of repeatable processes, like those with a lot of outsourcing already.
You won’t find AI skeptics even among these practical investors, but they are still are unclear exactly how exits, moats, and business models will play out in the next 3-5 years.
70% of software company acquisitions are still by private equity investors or private equity-backed strategic acquirers, so their views are important to SaaS founders thinking about their eventual end games.
We live in exciting times.
* If you’re a private equity, growth equity, buy-and-hold investor, or acquirer of practical B2B SaaS companies under $20M ARR, let’s connect so I can understand your focus and your model. DM me here.
