Who Wins the Vertical AI Wars? | Luke Sophinos vs Nic Poulos

Nick and I were catching up a little bit before we hit the record button.

And I think...

If you look at the data, it's pretty interesting.

Everyone was screaming SaaSpocalypse, right? And you look at the data and there's a lot of articles that have come out that basically say, hey, look, SaaSpocalypse is over because just kind of the software index funds have all rebounded and it seems like they're not necessarily great, but they're stable.

And so that turns our attention to, okay, if that's over, what's going to happen in each vertical? Is there a war between...

you know, and that new vertical AI companies, you know, AI native service businesses, the legacy system of record players, like how is this all going to unfold? So Nick and I thought we'd unpack that too.

Yeah, I think we should do it.

And it might be good actually, not in, I'm thinking about it as a, you know, kind of entree to the conversation.

I actually ran, um, This last week, I just took a look at the numbers in terms of how software is actually doing.

And, you

know, paraphrasing really, if you look at horizontal apps and vertical apps, right, like just public software equities, they're both give or take 5%, about 60% up from Lowe's.

So, you know, maybe the recovery needs a little bit more time, but more or less, you know, there's been great recovery.

I think the one caveat to that is if you look at infrastructure software, it is surging, right? Like if you include all horizontal, like apps plus infrastructure, it's like 90 something percent simply because, you Infrastructure is, you know, the name of the game.

And if you had to get more specific about what is like not just recovered from but benefiting from all this, it's businesses with consumption-based business models.

So we wrote a piece about that.

I mean, this was apparent, I'd say, like three months after the SaaSpocalypse.

It doesn't matter if you're new or legacy, like all the way down, MongoDB to RingCentral.

If you have a model that is consumption-based, that can scale as agents scale, you are getting all the tailwind right now.

I'd say for vertical, they're about on par with

horizontal.

And then maybe the last thing I'll say with this diatribe is, What is interesting is vertical still actually has, from a retention rate perspective, a benefit.

And where you're actually seeing the most pressure on net retention rates is horizontal application layer software.

How does that all strike you and how you're feeling the post-SASpocalypse world?

Yeah, I mean, it feels right.

I think it was all slightly overblown.