The SaaSindustry is undergoing a fundamental structural transformation. Four permanent forces are crushing the middle market and demanding that every company position for Floor or Ceiling.
Features that took two years to build now take two days to replicate. AI has collapsed the development timeline for functional capabilities to near-zero. Any feature that can be described can be built by competitors — or by customers themselves using AI coding assistants.
Investment implication: “Features as moat” is dead. The only defensible positions are integration depth and network effects.
Force 2: Zero Marginal Cost
The cost to serve one additional user approaches zero with AI. Cloud infrastructure costs continue to decline. AI handles customer support, onboarding, and even code generation.
Investment implication: Price competition at Floor is brutal and permanent. No sustainable middle-ground pricing exists.
Force 3: Buyer Sophistication
Buyers benchmark, compare, and negotiate. The information asymmetry that allowed premium pricing for “good enough” solutions has evaporated. Procurement teams now have access to the same AI tools.
Investment implication: Companies must be either the best (Ceiling) or the cheapest (Floor). Anything in between gets commoditized.
Force 4: Capital Efficiency Mandate
ZIRP is over. Capital has cost. The Rule of 40 is now the Rule of 50+. Unit economics must work from early stages — companies cannot “grow into” profitability.
Investment implication: Middle-market companies with broken unit economics cannot be “fixed” with more capital.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
