It has been a painful few weeks for enterprise SaaS stocks, and it's not over.
The big picture: AI is forcing a reckoning.
Friction point: To survive the historic sell-off, SaaS companies will need to change their beloved yet outdated usage-based and seat-based pricing models.
- The industry has fought outcome-based pricing, where costs are tied to measurable results and the seller assumes some risk.
- But AI will continue to drive down usage and headcount, meaning fewer seats to sell.
Zoom in: SaaS companies will also need to consider specializing to stay relevant, focusing on specific verticals and no longer trying to be everything to everyone.
- Perhaps the biggest change for SaaS companies, though, will be thinking about integrating AI at its product core — and that could mean going private if the company is public.
What they're saying: "I think every public company in the space is thinking, 'If you try to be an AI company, is it better to do it in the public market or private market?'" a banker tells Axios Pro.
What we're watching: Thoma Bravo is looking for SaaS companies feeling unloved by the public markets.
The bottom line: This isn't the end for software, but it will be if it doesn't take this opportunity to make some changes.
