Key Takeaways from SaaStr Annual 2024: Navigating AI’s Impact and Opportunities for SaaS Companies
SaaS Capital attended SaaStr Annual 2024. This was the first SaaStr AI Summit and it lived up to its billing – discussions on all things AI dominated the event. As this hot topic continues to be top-of-mind for many operators and investors, we wanted to share some of our key impressions and takeaways from the panels as well as discussions we had with industry participants.
AI Excitement Among the VC community (with a side of restraint)
Within the VC group, the impact of AI was very much described as a step-change rather than an incremental advance. Not surprisingly, a large chunk of investment capital is earmarked for AI-related opportunities. However, there was also acknowledgment from several different voices that the industry may be in the midst of the first part of Amara’s Law: people tend to overestimate the short-term impact of new technology while underestimating its long-term impact.
To this, we would add a corollary of Amara’s Law, which reminds operators that the road to long-term impact is littered with the disappointments of overzealous early adopters and investors. The long-term is made up of a series of “short-terms” and any long-term impacts of AI may be of little use to operators who rush to develop AI solutions without fully considering how these will be deployed, supported, and, ultimately, deliver concrete returns to the business across the short-to-medium term.
How the AI-Wave is Different than the Cloud-Wave
The early years of migration to the cloud were dominated by a single service provider: AWS. It took multiple years for competing cloud providers to break into the market in a meaningful way. In contrast, the AI movement has been characterized by a diverse offering of models with no clear leader. Companies are leveraging multiple models from various sources simultaneously depending on the use case.
A second key difference between the two waves relates to end-user experience. End-users were largely unaffected by the transition to the cloud. By and large, they interacted with the software the same way they did when it was on-premises. AI has the potential to create a dramatic shift in end-user experience, interaction, and utility.
How AI Will Transform SaaS
The industry consensus is that AI will usher in all manner of change. What this change will look like remains an open question. Consistent with prior periods of early-stage, mass adoption of an emerging technology, a dominant theme was operators trying to identify generalizable ways to implement, and derive value from, AI. Part of the challenge here is a function of time. Often, there simply hasn’t been enough of it to truly evaluate a product, determine what has worked, why it has worked, and if it will work in a different setting.
AI’s Impact on Customer Support: Preparing for a New Era in SaaS
One area of emerging agreement was that customer support and services are likely to play a much larger role than in the “legacy” SaaS product model. As mentioned above, end-user experience may be dramatically different for AI product offerings. Companies will have to ensure they are properly tooled to manage this change in experience and bring their customers along the (potentially steep) learning curve so that customer usage and retention are maximized.
Build vs. Buy: Navigating AI Integration for SaaS Companies
A theme under the umbrella of imminent but uncertain change that we did not hear directly addressed is the question of build vs. buy in a world of AI. The AI opportunity is often presented as a chance to streamline internal processes and internalize hard-to-manage, expensive, or non-core tasks that were previously outsourced. Related to this, of course, is whether a number of B2B SaaS offerings are at risk of being “internalized” themselves. We have no doubt that some of this will occur.
The calculation of whether to build or buy will be unique to each company but, overall, we would expect those SaaS companies providing mission-critical software with not-easily-replicable domain expertise to be far less susceptible to customers churning in favor of an in-house solution.
For a high-level overview of how we at SaaS Capital are considering some of the impacts of AI, my colleague Randall Lucas wrote a piece – AI Risks to B2B SaaS Companies: A Framework for Estimating Risk – which explores how AI may affect a variety of SaaS business models.
The Early Winners in the AI Revolution (we’re not talking about a chipmaker)
In the face of consensus optimism over AI’s potential, and uncertainty in how, exactly, to extract value from said potential, the immediate winners seem to be … management consultants. The large management consulting firms expect over half of their global revenues to be related to generative AI activities in 2025. There may be no greater sign of both the enthusiasm and uncertainty around AI than this.
