The SaaS Era of 2013-2022 is Over. Welcome to The World of Hyperfunctional SaaS. | SaaStr

So is AI taking over everything?  Will $1B SaaS companies be run by 1 person teams?

I mean … maybe.  Across the SaaStr Fund portfolio, I’ve seen multiple portfolio companies lost $1m customers to new, in-house AI initiatives.  But I’ve also seen others grow even faster as AI rebooted and enhanced their products.

What I do know is many of the billion+ SaaS companies I invested in a decade ago would not be remotely competitive today.  And that’s how it should be.  Software, innovation and time marches on.  And if you can’t keep up, you’ll get left behind.

Many today have been unable to keep up, and have fallen behind, and seen growth slow to 20%, 10%, even 0%.

What I really think is happening is customer expectations have gone way up.  AI is part of it, platforms are part of it.  And promises are part of it.

We’re promising to do a lot more.

Today, customers are expecting:

• AI to replace 30%-50% of their workforce.  Is this possible?  Maybe, maybe not.  But it’s already starting in the contact center, where leaders from Zendesk to Gorgias to Intercom to Talkdesk are automating away 30%-50% of contact center headcount.
• All unstructured data to be instantly structured and searchable.  Search was sleepy for years.  Now, it’s front and center.  Products that were complex to extract data before, especially documents, can now be organized in real-time by AI.  This is one reason Aaron Levie is so excited about AI.  It unlocks all your documents.  Customers aren’t satisfied anymore with not being able to get answers from every and any dataset.
• Every product to work elegantly in a plain English prompt.  We’re all getting used to working the OpenAI way. Now customers expect your product to work just as elegantly, or more so.  Not crappy interactions that just return crummy results.
• Even complex onboarding to be fully automated.  Complex enterprise business process change still takes time.  But anything below that, customers are expecting to Go … Now.  Not in a week or a month.  AI has changed expectations here.
• Core platforms to do the work of 20 add-ons and point solutions.  Just to do a lot more.  HubSpot, Rippling, Monday and others were early here.  It’s not just that customers want to buy more products from the same vendor.  It’s that they expect their solutions to do more.  Why can’t my payroll app handle onboarding and 401k and pension and contractors?  Why can’t my CRM also do marketing automation and support, out of the box?  Why can’t my CMS also automate clips, video, and social?  And so on.  Yes, there is point solution fatigue.  But it’s more than that.  Customers are now demanding every vendor do more of what they need.

It’s the era of Hyperfunctional SaaS. 

It’s a lot more work, and harder to build than before.  For often the same deal and deal size.  Step up — or step aside.

And a related SaaStr great deep dive with Parker Conrad, founder CEO of Rippling, here: