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Original article
Inside the Coming AI Market “Supercycle” and How Cloud Startups Can Benefit: The Battery Ventures 2024 State of OpenCloud Report - Battery Ventures
Battery-OpenCloud-Report-2024.pdf
Key takeaway
- For entrepreneurs: AI is transforming from a feature to a fundamental business model shift, where companies can now convert traditional services and labor costs into software revenue, expanding TAM dramatically.
- For investors: While AI is creating massive opportunities ($4T+ potential market), not all startups will benefit - focus on companies that can demonstrate clear value capture and sustainable unit economics rather than just AI integration.
Summary
The 2024 State of OpenCloud Report highlights a pivotal moment in technology where AI is catalyzing the next major platform shift, similar to mobile and cloud transitions. Cloud providers are aggressively expanding infrastructure capacity, with AI driving new consumption patterns. While public software valuations have stabilized, there's a growing disconnect between private and public markets. The report emphasizes that successful companies are those that can combine AI capabilities with strong operational metrics and clear value propositions.
Insights
- AI is driving a new technology supercycle with $4T+ market opportunity
- Cloud providers' AI infrastructure investments are growing exponentially
- Private company valuations maintain a 3.2x premium over public markets
- Product design and user experience are becoming primary moats as technology barriers erode
- Companies are shifting from "Software-as-a-Service" to "Services-as-Software" models
- Sales compensation models need restructuring for consumption-based AI products
- New metrics combining traditional SaaS and AI-specific indicators are emerging
- Leading tech companies are returning to office-based work
- Software spending as a percentage of US GDP continues to grow steadily
Implications