The New Business of AI (and How It's Different From Traditional Software) | Andreessen Horowitz

Sobriety source #2: AI as the next platform shift. Every wave of new companies that transforms their respective industries is fueled by a major platform or technology shift. The advent of the web did this. The smartphone and mobile applications did this. And there is no doubt that AI is our next wave. But does every new wave always necessarily favo... See more

With Generative AI’s budding reasoning capabilities, a new class of agentic applications is starting to emerge.

What shape do these application layer companies take? Interestingly, these companies look different than their cloud predecessors:

• Cloud companies targeted the software profit pool. AI companies target the services profit pool.


• Cloud compa

... See more

First, AI agents are likely to lead to new go-to-market strategies for SaaS companies. With potentially fewer humans in the loop, there is likely to be a further decoupling of seats/users and contract value. To capture value, LLM applications will need a new scaling factor for pricing: variable value-based pricing is a plausible solution.

Moreover, ... See more

Implications for the SaaS Industry

As more and more products add AI features, this shift has enormous implications for the entire SaaS ecosystem:

1. Pricing Strategy Overhaul : SaaS companies will need to rethink their pricing strategies completely. The days of simple "per user, per month" models are numbered.


2. Evolution of Sales and Marketing

... See more

A New Cohort of Agentic Applications

With Generative AI’s budding reasoning capabilities, a new class of agentic applications is starting to emerge.

What shape do these application layer companies take? Interestingly, these companies look different than their cloud predecessors:

• Cloud companies targeted the software profit pool. AI companies target

... See more

expect the traditional per-seat subscription model will increasingly come under pressure as AI products deliver work rather than augment personal productivity.