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Original article

Vertical SaaS: Now with AI Inside | Andreessen Horowitz

Key takeaway

• For entrepreneurs: AI integration in Vertical SaaS can significantly increase revenue per customer by 2-10x through automation of complex tasks.
• For investors: The third wave of Vertical SaaS (cloud + fintech + AI) presents a massive opportunity for growth and market dominance.

Summary

The article discusses the evolution of Vertical SaaS (VSaaS) and how AI is driving its latest wave of innovation. It explains how AI is enabling VSaaS companies to take on more complex tasks, reducing labor costs for customers in areas like sales, marketing, customer service, operations, and finance. This advancement is expected to significantly increase revenue per customer and open up new market opportunities.

Insights

• VSaaS has evolved through three waves: cloud, cloud + fintech, and now cloud + fintech + AI.
• AI is transforming VSaaS by turning labor-intensive tasks into software-driven solutions.
• The integration of AI can potentially increase VSaaS companies' revenue per customer by 2-10x.
• AI augmentation in VSaaS can dramatically reduce internal and external labor spend for businesses.
• Vertical software markets tend to have winner-take-most dynamics.
• The third wave of VSaaS (with AI) is considered the most impactful force in the category to date.

Implications

• VSaaS companies may need to rapidly adapt and integrate AI to remain competitive.
• Businesses using VSaaS solutions could see significant cost savings and operational efficiencies.
• The job market in industries served by VSaaS may shift as AI takes over certain roles.
• Investors may need to reassess the valuation and growth potential of VSaaS companies based on their AI capabilities.