Dave 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 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 for hundreds of vertical SaaS founders, on November 5, 2025.
In this episode, we discuss the practical opportunities and risks of AI as it is currently developing in 2025 for vertical SaaS companies. Dave explains several powerful examples of how AI is being used in his portfolio companies and the new strategic questions that are being discussed.
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 with important 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.
This Interview is great for SaaS founders at $5M–$20M ARR, considering growth equity, vertical SaaS founders facing AI-native competitors, and bootstrappers building multi-product SaaS platforms.
Quote from Dave Yuan, founder of Tidemark Capital
“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 to ROI that’s measurable, oftentimes associated with revenue.
“And arguably, they’re only getting started because the outcomes that they’re measuring are relatively low value 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.“
Key Takeaways
- Growth Equity Defined – Growth equity sits between venture risk and PE efficiency, funding SaaS founders scaling $5M–$20M ARR companies.
- Vertical SaaS Focus – Deeply specialized SaaS companies with strong customer fit become sticky platforms that expand into durable multi-product businesses.
- AI Threats Loom – Hero users and “Cousin Richie” tasks open entry points for AI-native competitors to challenge existing SaaS incumbents.
- Control Point Advantage – Systems of record hold key workflows, data, and payments, making them powerful defensive SaaS control points.
- Monetization Shifts – AI enables outcome-based pricing and labor-replacement models that drive 2–5x ARPU across SaaS categories.
- Leadership Matters Most – Active founder involvement drives AI adoption success more than company size, funding, or market positioning alone.
Podcast Sponsor – Designli
This podcast is sponsored by Designli. Designli helps non-technical software founders build serious products with clarity, confidence, and peace of mind—by serving as their fully outsourced engineering team.
Designli has helped over 200 non-technical and practical founders bring their visions to life as great software. Visit Designli.co/practical to regain clarity, delight your customers, and make real progress every week.
