Compound248 💰

I heard an incredible analogy from a VC friend that I can’t stop thinking about. “The moat in software was the cost of building software. And Claude Code just mass produced a bridge.” It’s wild when you think about the impact of this. The SaaS boom produced a few dozen billionaires and a bunch of zero sum winners. But the AI SaaS era will mass produce millionaires. There will be fewer ServiceTitans hitting $5B valuations, and instead there will be 50,000 companies doing $500K-$5M each, run by 1-3 people with deep expertise and huge margins. To be clear, I believe that the total value of software goes up, and the number of companies created goes up exponentially. But the number of people who capture the value also goes up 100x. I don’t believe in the “SaaS is dying” headline, I think it’s missing the point. It’s simply that the power of SaaS is changing hands.

I’m surprised markets aren’t pricing in long term disruption of card networks + interchange like $V and $MA. By $CRCL and $COIN. From Global Markets Head at Circle: "Over the past nine months, AI agents completed 140 million payments with a total transaction volume of 43 million US dollars. Among these, 98.6% were settled in USDC, with an average transaction amount of only 0.31 US dollars." Card networks and % fee payment processors like $PYPL are likely going to be cooked?

I have a good buddy in SaaS land who built one of these: 6 people, $3 million in ARR - a VMS with a niche market and very legacy competition. They never earned a profit, but he worked his ass off to cover an okay salary and try to grow enough to justify the capital he’d raised. Making sales was hand-to-hand combat: most software does not sell itself. It takes labor and time and adaptability. While my buddy ended up crushing it on a 10x ARR exit, if the idea is AI is going to cause a thousand software flowers to bloom, exit multiples will keep coming down as growth will be harder and more expensive, even as LTV declines from competitive churn. And AI-based SaaS will have lower gross margins to cover other costs because tokens and models are very expensive. Brutal. That combination removes “crushing it on the exit” from the equation, which means these tiny ARR businesses that don’t generate a profit will be little more than okay paying jobs, but with entrepreneurial downside.

Wendy’s FreshAI is powered by Google AI, not SoundHound. $SOUN iykyk