“Where Vertical AI Wins” - Patrick McGovern - Bowery Capital

SPOTIFY | APPLE | OTHER PODCAST PLATFORMS| VIDEO

“Engineering Management in the Age of AI” - Karim Fanous

SPOTIFY | APPLE | OTHER PODCAST PLATFORMS| VIDEO

Redpoint Ventures - Market Update

Redpoint (h/t Logan Bartlett, Adil Bhatia, and Lydia Day) made a strong contribution to 2026’s “State of _” genre with their Market Update (69 slides, our 13 key slide excerpts). Selected highlights below:

G2 On AI x Software Buyer Search

"How AI Search is Rewiring B2B Software Buying" - from G2 / Tim Sanders + co (n=1,076 B2B decision makers)

#1 - Godard Abel was right on our earlier podcast - AI expands the shortlist! (direct clip linked). Anecdotally, in our own buying AI, both G2’s Chatbot and Gemini have identified vendors we otherwise would not have considered.

#2 - huge volume of insights in the report - like 71%(!) of the B2B software funnel starts with a chat prompt - especially at the CMO level. Huge implications for monitoring, content, attribution, pipeline visibility, and more!

ICONIQ 2026 GTM Benchmark Update

A largely positive "2026 State of GTM" from ICONIQ:

- Consistently improving win rates, an important sign relative to consistent win rate declines in 2025.

- Those challenging closing rates meant forecasts and pipeline coverage were significantly strained in 2025 (see slides from our Cloud Ratings’ “2025 Value Creation Summit”)

- Back to ICONIQ, positive trends in cost/opportunity and sales cycles.

Curated Content

Ciridae (an AI workflow architecture start-up, backed by A16Z and General Catalyst; h/t Felix Stocker & Jai Kondapalli) released an interesting AI transformation explorer, by sector and even by private equity firm. We made a quick recut to visualize the findings:

Sapphire Ventures (h/t Kevin Burke + co) March Market Memo included good coverage of AI agents…

along with this Stratechery “Agents Over Bubbles” take.

Apoorv Agrawal from Altimeter on “The Economics of Generative AI”

March 2026 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through March 2026 - full slides below:

B2B AI Interest Index

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) rebounded and reversed poor winter trends (while noting inherent seasonal lows in December).

Bellwether Microsoft Copilot continues to stay at a higher plateau. Other “Blue Chips” (i.e., Hubspot, ServiceNow) remain range bound.

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) performed strongly in Q1 2026.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

ICONIQ (h/t Vivian Guo and team) recently released its “State of AI: Bi-Annual Snapshot” report (44 slides, ungated).

Key call-outs: while AI product gross margins are projected to increase by ~700 bps (‘25: 45% → ‘26e: 52%):

… the fabulously granular cost structure breakdown makes those margin increases look optimistic. “Talent” - a largely fixed cost - is only 26%-28% of the cost structure for the GA to Scaling stages. All other costs are highly variable, such as inference and cloud costs. Even for model training, there is little fixed cost leverage since model training is an ongoing process. Key message: There seem to be too few fixed costs to generate software economics.

Notably, larger organizations (>$500m revenue) are the leading deployers of customer-facing agentic AI.

The increasing AI deployment and returns to scale are consistent with our 2023 formula below (with emphasis on the volume variable) and Morgan Stanley findings that large enterprises are achieving the highest ROIs:

AI ROI = (Business Process Value x Volume) / AI Costs

Back to ICONIQ, flagging this data + commentary as a headwind: “Internal AI is increasingly funded through R&D budgets, with fewer companies relying on net new budget allocation.” This could have implications for both AI vendors (i.e., hitting budgetary guardrails + enterprise reality checks) and non-AI software vendors (i.e., AI truly competing in the same IT dollar pool rather than a separate “innovation” budget).

If you know, you know (“IYKYK”), any and all AI model market share charts attract a lot of “attention” amongst VCs:

And yet another data point for the “buy versus build” component of the “Software Is Dead” daily debate:

December 2025 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through December 2025 - full slides below:

B2B AI Interest Index

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) registered a notable decline. Note: holiday seasonality will be at play throughout this month’s report. Beyond seasonality, as AI-native vendor brands strengthen, generalized product searches might be losing share to brand-targeted search.

Bellwether Microsoft Copilot continues to stay at a higher plateau. Other “Blue Chips” (i.e., Hubspot, ServiceNow) had a weak December (down 4% YoY, so not just seasonality here).

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) registered a seasonal MoM dip, but interest in the Incumbent basket is up 119% YoY.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Scale Venture Partners (h/t Mark Gustaferro + Craig Rosenberg), in partnership with Ray Rike and Benchmarkit, recently debuted their GTM Benchmark interactive database.

We further analyzed their data to examine points of separation, meaning where the “best of the best” differentiate themselves from the median company.

Our downloadable 7-page document includes more on GTM motion (i.e., PLG vs Inside Sales vs Outside Sales vs Channel) and volatility:

DOWNLOAD HERE

A caveat: Some of these variances are structural (i.e., an enterprise ERP vendor will have a significantly longer sales cycle, regardless of execution; or a PLG vs Channel vs Sales-Led motion will have many different baseline metrics). Taking into account that dynamic, our key call-outs:

SALES REP TURNOVER: 773% Delta

This is the single most glaring “off the chart” stat in the entire dataset.

For the top 10% of companies, annual sales rep turnover is significantly lower than the mean, with a 773% difference between the best and the average.

The elite performers are playing a different game: Retention. You cannot build compounding momentum when you are constantly replacing your GTM engine parts. The “Best of the Best” have essentially solved the turnover problem, keeping institutional knowledge in-house.

CAC PAYBACK PERIOD: 192% Delta

The separation here is stark: the 90th percentile outperforms the average by 192%.

While the average company struggles with payback periods that drag on, top-tier firms are recovering their acquisition costs nearly 2x faster. Which allows them to reinvest in growth cycles significantly faster than their peers.

QUOTA + RAMP: >100% Delta

It’s all about having ramped productive reps hitting their number.

Exceeding Quota: The separation for “% of Reps Exceeding Quota” in the most recent period is 121%.

Ramp Speed: This is fueled by a 107% advantage in “Time for Rep to Fully Ramp”.

This suggests the “Best” aren’t just hiring better; they also have superior enablement, Finance → GTM hiring coordination, and territory-planning infrastructure.

Related Research Call Out:

Declining quota attainment and slower ramps have been relentless long-term trends in a “maturing growth industry” - see our 2024 “State of Software” (Full slides, 1st presented at Bowery Capital’s 2024 AGM) - perhaps making top decile outperformance all the more impressive.

INBOUND HANDRAISERS: 129% Delta

The “Best of the Best” generate 129% more pipeline from Inbound Hand Raisers than the average.

Put differently, the top decile has a “Brand Dividend” with enough market pull that prospects come to them.

Reminder - we have the Scale GTM Benchmarks available in a downloadable PDF here:

Scale GTM Benchmark - 7 Page Analysis

Curated Content + Upcoming Coverage

Dave Kellogg released his excellently comprehensive 2026 Predictions →

His callout of Jaya Gupta and Ashu Garg of Foundation Capital’s “AI’s trillion-dollar opportunity: Context graphs” may raise some solutions to the poor success rates covered in our “Is AI An Abject Disaster?”

Flagship reports have been in full bloom this January → we hope to cover these individually… but might as well give you the underlying links too:

Avenir (h/t Jared Sleeper + Hannah Bao + co) published their excellent “Future of SaaS”- our excerpts here

a16z (h/t David George + co) released their “State of the Markets” - our excerpts here

Mayfield released a report on “Enterprise Agentic AI” (n=266, h/t Gamiel Gran)

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Battery Ventures (h/t Dharmesh Thakker, Danel Dayan + co recently released their “State of AI” report (36 slides here).

Beyond strong core “State of _” type slides like this example:

… the report included important Battery frameworks for the impact of AI on business + financial models. For our newsletter audience, especially these pre → post AI GTM metrics:

• AE Quota: $1.0-$1.2m → $1.2m-$1.5m

• Conversion Rates: 20%-30% → 40%-50%

• Attainment: 70% → 80%

November 2025 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through November 2025 - full slides below:

B2B AI Interest Index Slides

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) registered a notable decline. Note: holiday seasonality might be at play throughout this month’s report.

Bellwether Microsoft Copilot continued its broad acceleration. Other “Blue Chips” (i.e., Hubspot, ServiceNow) registered a poor November.

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) registered a poor November, especially relative to a tough October comp. That said, the n=340 Incumbent trendline remains overall positive for 2H 2026.

Bonus Coverage: OpenAI “The State of Enterprise AI”

OpenAI released their own “The State of Enterprise AI” (24 pages). These excerpts should speak for themselves + pique your interest in the full report.

The strong growth across Healthcare, Manufacturing, and Finance could serve as a counterargument to AI as being overly dependent on Technology sector adoption.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Investor “State of __” Reports - Best Of 2025

[NEW] Meritech: Recently released their “2025 Market Update” (Slides | Video)

[NEW] Battery Ventures: “State of Enterprise Tech Spending December 2025” - covers 100 CXOs with $44 billion of tech spend = great coverage of “Enterprise Plus+” - h/t Evan Witte, Scott Goering, Nick Elsner)

[NEW] Menlo Ventures: “State of Generative AI In The Enterprise” - h/t Tim Tully, Joff Redfern, Deedy Das, Derek Xiao

Coatue: “Public Markets Update” (SLIDES | VIDEO) from October 2025 - with our excerpts + takes here

[NEW Curation] Scale Venture Partners: “State of GTM AI” - h/t Craig Rosenberg + co

Related Resource: Subscribe to Scale’s Quarterly Flash Reports - great real-time read of the market - h/t Dale Chang + co

[NEW Curation] Norwest: “B2B Sales & Marketing Benchmark Report” (102 slides, n=177) - h/t Renée Cohen

Redpoint - “2025 Market Update” - our takes + excerpts here - h/t Logan Bartlett, Adil Bhatia, Lydia Day

ICONIQ’s “State of Software 2025” (73 slides, h/t Christine Edmonds + co) - our full coverage here.

Bessemer Venture Partners - “State of AI 2025” (note the change from the historic Cloud → AI)

Felicis Ventures: “How to Size the Market for Vertical AI” - h/t Sundeep Peechu + Eric Flaningam

… plus my “State of Software + AI” presented at Bowery Capital’s Annual Meeting:

Benchmark Reports - Best Of 2025

Tidemark: 2025 Vertical + SMB SaaS Benchmark report (60 slides, n=200+). This is one of the most granular AND thesis-driven reports in the industry. Our full coverage here. h/t Dave Yuan, Andrew Walsh + co.

High Alpha: “2025 SaaS Benchmarks” (n=800+) with our takes here. h/t Kristian Andersen, Scott Dorsey, Mollie Kuramoto + co.

Benchmarkit + Emergence Capital: Cloud Ratings was honored to support Ray Rike + co’s benchmark report (n=563) as a partner, with our full coverage + update of our historical time series here:

Sapphire Ventures + KeyBanc: Here is the 2025 Benchmark Report (email required) from the longest-running series in the industry. Our coverage here.

Industry + Operator Reports - Best Of 2025

G2: Tim Sanders + team’s “A Leap of Trust: AI Agents Are Winning Hearts and Wallets” (57 slides; n = 1,000+ B2B software buyers). Key themes:

• More evidence of solid AI ROI

• Surprising signs of a “risk on” mentality from buyers despite meaningful incident rates and higher-than-expected human oversight. Those incident rates align with the poor AI success rates we covered in “Is AI An Abject Disaster?”

Related reading: G2’s “2025 Buyer Behavior Report” with our report takes here:

Fullcast: Guy Rubin + team’s “2025 H1 GTM Benchmarks” (covering $43 billion of pipeline) and their full year 2024 GTM benchmark report, which I deep dived with Guy Rubin on our “Cloud Radio” podcast (Audio | Video).

Zylo: Yet another favorite that was worthy of its own podcast episode: Ben Pippenger + team’s “2025 SaaS Management Index” covers $40+ billion of software spend across 40 million licenses, with uniquely strong visibility into the “Enterprise Plus” segment (average SaaS spend of $284 million per org!). Our report coverage focused on shorter contract durations as a symptom of AI-driven uncertainty.

[New] 6Sense: “2025 B2B Buyer Experience Report” - authoritative + scientific from Kerry Cunningham + co

Pavilion: Their excellent member surveys enabled our own research into n=227 forecast outcomes: “Pipeline & Deal Flow” is the most cited driver of misses, inspiring our “Marketing Takes The Blame” note:

~Indie Writers - Best Of 2025

Dave Kellogg always (deservedly) makes this list → some of his best work highlights of 2025 include “SLIDES - Selling Work vs Selling Software” + “How To Navigate the Pipeline Crisis” + “The Era of Haves and Have-Nots”

Along with ~anonymous writers deserving of shout-outs - + + …

And Patrick McGovern of Bowery Capital for taking on the Sisyphean task of creating a new VC Substack in the year of 2025 → help him by subscribing to the “” newsletter.

Recurring Market Updates - Best Of 2025

Recurring updates to subscribe to:

RepVue Cloud Sales Index - h/t Adam Little + co

ChartMogul Monthly Benchmarks - h/t Sophia Faustino + Nick Franklin

Scale Venture Partners’ Flash Report - h/t Dale Chang

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Our Own Best Content Of 2025

Our 2025 Cloud Ratings Podcasts

Godard Abel of G2: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

Joey Brookhart of AlphaRepo: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

Guy Rubin of Ebsta / Fullcast: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

Ben Pippenger of Zylo: AUDIO | VIDEO | All Other Platforms

Our Value Creation Summit

With the theme “Better Data = Better Forecasts + Returns,” we were honored to have Guy Rubin, Ryan Walsh, Sean Saint, Jaap Westrik, and Kai Mitsushio serve as expert speakers:

Event Replay Available On YouTube

With our written event recap here, my presentation slides here, and my session here:

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Since I’ve been regularly consuming examples of AI productivity gains - whether SaaStr or S&P500 public companies, more on both below - I’ve assumed any headline numbers from any AI benchmarking charts are similarly positive: “A 70.0 on a legal benchmark report surely means AI lawyers are 70% as good as humans, right? That seems pretty good.”

Using Scale AI’s SEAL LLM Leaderboards, we translated 3 different studies into approximate comparisons to their human equivalent by domain:

Unsurprisingly, coding scores well. With Finance and Legal OK(?) since we are early(?) in the AI cycle. The drop-off from All Questions (including Easy) to Hard Questions is meaningful across all 3.

A fascinating new study from the Center for AI Safety and Scale AI caught my eye: the Remote Labor Index, which benchmarks AI against the performance of experienced freelancers on UpWork across 240 projects.

The freelancer vs AI projects:

• Spanned from video, CAD, graphic design, game development, audio, architecture, and more.

• Mean Human Completion Time: 28.9 hours (Median: 11.5 hours)

• Average Project Value: $632.60 (Median: $200)

• Implying hourly rates of $17-$22/hr

The project success rates were surprisingly low: 0.8%-2.5%! Particularly in light of the Elo scores (Elo Wikipedia entry) as high as 509, which I, as a non-chess player, assumed implied a ~51% capability versus humans.

Relative to what’s “priced in” and the sheer amount of capital into AI, these success rates surely are an abject disaster?

Why are the headline success numbers so low? The Remote Labor Index measures Full Automation as: “The percentage of projects where an AI’s deliverable is judged at least as good as the human standard. This is the primary success metric, defined as whether a ‘reasonable client’ would accept the work.”

The critical failure driver: any 10+ hour project requires multiple steps. Therefore, any performance gap versus humans compounds. Especially if unsupervised.

Taking this (maybe blindingly obvious) insight back to the Scale leaderboards for other business AI domains, seemingly OK headline capabilities collapse once a multiple-step assumption is applied. With 5 and 10 step calculations applied here:

At 10 steps, AI Coding is 85% worse than human developers. While Finance AI and Legal AI yield 99.8% worse results once 10 steps are involved!

Caveat: This is a brute and mechanical calculation. Nor does it have an ounce of the sophistication of research benchmarks (the RLI paper involved 48 authors!).

What Does This Success Rate Math Mean?

My immediate reaction: these near-zero AI success rates are damning to the “Software Is Dead” / “End of Software” (Chris Paik 2024 Google Doc) take.

At a more philosophical level, the success results reminded me of the “AI gives you infinite interns” framing (see Benedict Evans’ November 2025 “AI Eats The World”).

Teasing out the analogy: can interns truly help with easy work (like moving logos around or taking meeting notes)? For sure. How often would an intern complete a 10-hour project (for an experienced professional) at an experienced professional’s quality? Very rarely. Taking into account any manager costs (like assigning or reviewing the project), those intern projects destroy value.

Compared to the latest Scale AI benchmarks + math, the intern framework still holds up.

As an aside, the *infinite* aspect is alluring and well captured by Benedict Evans’ 1800s steam-engine analogy. Anything *at all positive* multiplied by *infinity* is wildly attractive and worth trying to get right.

All of which aligns with Buck on Software’s 2024 “Winds of Change” and its key concept of unbounded task TAMs… so long as it is useful software.

Our macroeconomic work at Cloud Ratings on software developer value added (slides) sets a more encouraging precedent for AI: like software developers, AI interns will be better utilized over time, especially in terms of price/quality.

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Bad Benchmarks But Real World AI Successes: SaaStr + S&P500

Tracking the progress SaaStr (Amelia Lerutte + Jason Lemkin) has made internally with their implementation of AI agents has raised my expectations of what is possible in the real world… with hard human work to get those AI results.

SaaStr recently hosted a remarkably transparent workshop (SLIDES | VIDEO) on their AI agent learnings. Seriously, go watch it.

A key theme of “constant calibration + daily oversight” certainly aligns with the Scale benchmarks and the “infinite interns” concept.

The growing volume of AI success disclosures from S&P 500 components (via Morgan Stanley, 11/06/25) also serves as a counterpoint to any “AI = abject disaster” conclusions:

Of course, relative to what’s priced in for AI, perhaps 15% of the S&P500 disclosing AI gains is too low? Nor is it broad-based enough, with only mid single-digit disclosure rates from real-world segments like Materials and Health Care (versus a 39% disclosure rate in Tech broadly, 59% for S&P500 Software & Services)?

Of note, the mix of ROI drivers between AI and pre-AI software (per Cloud Ratings’ “Drivers of Software ROI” and “IT ROI” studies) is very consistent.

October 2025 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through October 2025 - full slides below:

B2B AI Interest Index Slides

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) declined sequentially versus a strong September, though above its summer lull.

Bellwether Microsoft Copilot continued its acceleration. Other “Blue Chips” (i.e., Hubspot, ServiceNow) remain range-bound at best and small in absolute terms.

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) have seen a notable 2025 breakout relative to a very range-bound 2024. With October accelerating:

Podcast With Godard Abel Of G2

FULL EPISODE: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

Our recent AI-oriented podcast with Godard Abel (CEO of G2) complements much of this newsletter edition.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

KeyBanc + Sapphire 2025 SaaS Benchmarks

I’ve been reading this series dating back to the Pacific Crest Securities (before their joining KeyBanc) days. We’ve kept a compilation of the historical KeyBanc SaaS metrics back to 2009 through 2024 to create a long-run time series - our full slides here and write-up version here:

Now onto the new 2025 KeyBanc + Sapphire report (email required).

My excerpts + takes will be a bit negative despite some positive trendlines. The summary metrics recap is very green for both 2025e and 2026e. Relative to 2024, 2026e reflects:

• ARR Growth: Reaccelerating from 15% to 25%

• Account Executive Sales Productivity: Up 60%

• Rule of 40: Up 21% (percent points basis)

This all sounds great… but the forecasting track record in software has been poor recently. Enough so we hosted a Value Creation Summit (Event Recap | Videos | Slides) with a key focus on forecasting:

In fact, this very KeyBanc/Sapphire report shows its own history of forecast misses:

In particular, the optimism of these key metrics/drivers stood out:

Even factoring in AI as a sales productivity enabler, this per AE improvement looks aggressive:

As does quota attainment: up 10% (percent point basis; note RepVue Q3’25 Cloud Sales Index shows quota attainment at 43%):

Drivers like this flow through to declining CAC ratios and improving Rule of 40 scores.

There is a lot more in the full report - like AI coverage → so go read the full report.

High Alpha 2025 Benchmarks

High Alpha (h/t Kristian Andersen, Scott Dorsey, Mollie Kuramoto + co) released its 2025 SaaS Benchmarks (64 slides, email required).

Notably, the sample size exceeded 800, making this one of the largest in the software benchmark universe.

This metric recap - including great CACs and strong Rule of 40s even at low ARR - suggests a respondent mix of higher quality than comparable surveys.

This slide captures the wide growth gap between AI winners and the rest (i.e., for $1-$5m ARR, “AI differentiation drives 70% faster growth”).

This employee count chart captures the degree of “getting fit” from the 2021/2022 market peak, particularly in the $20m-$50m and >$50m ARR segments.

This slide makes a compelling case for variable pricing models:

This In-Office vs. Remote comparison will surely attract attention: In-Office organizations grow faster (+11%) while also achieving a higher Rule of 40 (+3 points).

… with a similarly novel Founder Stress Levels vs Growth chart that is worth downloading the report to see.

This slide visualizes the holy grail of low CACs and high retention well:

Bonus: Accel Globalscape 2025

More of a “State of …” than benchmarks, Accel released its Globalscape 2025 report (64 slides). Our call-outs:

Anonymized gross margin data for AI application leaders:

At a simple average gross margin of 25% for AI leaders, this is radically below public SaaS benchmarks (76% per Accel) and below the 60% - 65% AI gross margins shown in Bessemer Venture Partners reports. To be fair, BVP also reports “Supernovas” (a group likely to be very similar to Accel’s top 7) at 25% gross margin.

… all of which gives me the chance to insert my XKCD-inspired importance of gross margins graphic (with more context here):

Back to Accel, they also laid out their version of “AI Bubble Math” here - TL,DR: AI CapEx needs to increase global GDP growth by 150 bps.

Other Recent Benchmark Coverage = Tidemark:

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Tidemark (h/t Dave Yuan, Andrew Walsh + co) recently released their 2025 Vertical + SMB SaaS Benchmark report (60 slides, n=200+).

This is one of the most granular AND thesis-driven reports in the industry, so Cloud Ratings was honored to serve as a report partner.

Tidemark’s Vertical SaaS Knowledge Project (VSKP) Framework frames the report:

The report classifies companies into primary product areas (i.e, Back Office vs FinTech) with our call-outs of particularly key metrics:

Of particular note:

• FinTech Gross Retention of 96% (vs ~90% for other product types): From a *compounding growth* perspective, having only to backfill 4% logo churn is a far, far easier headwind than replacing ~10%+ of logos typically seen in SMB + many vSaaS categories.

• Low CACs: All categories exhibited CACs below $5,000. Regardless of revenue per account, this is excellent in absolute terms.

We modeled1 the Tidemark data into estimated LTV / CAC ratios, including LTV on an 8-year customer life basis, to normalize for extreme gross retention rate scenarios (i.e., FinTech 96% GRR implies 25-year customer lives!). Even when normalized, the LTV/CAC ratios implied from the Tidemark sample are VERY strong (average = 23.5x).

Of note, publicly traded vSaaS also exhibit relatively high LTV/CACs - 9x-20x (for VEEV, TTAN, CCCS) vs 5x-6x for the overall public universe.

Multi-Product Investment Thesis Support

The Tidemark report covered multi-product data in depth - key excerpts here with much more detail in the full report.

Multi-product outperforms on the key growth + net revenue retention metrics (despite substantially lower revenue/account and slightly lower gross retention)

This TAM expansion slide speaks for itself:

RELATED RESEARCH: In part inspired by Tidemark/Lone Pine’s work on multi-product outperformance, we examined “Platforms vs Pure Plays” in partnership with G2 in late 2023:

Key messages:

• Platforms generated substantially equivalent customer satisfaction versus pure play specialist offerings

• G2 Buyer Behavior data shows buyers consistently prefer working with one vendor

… with more in our 32-slide, downloadable “Software Platforms vs Pure Plays” report.

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AI x vSaaS/SMB Benchmarks

Tidemark also covered AI penetration in vSaaS/SMB. Key excerpts:

Attach rates are growing explosively (median: 2024: 22% → 2025: 59%):

… with AI-enabled vendors posting moderately higher growth + retention rates:

There is a *lot* more in the full Tidemark report. As always, do your own work + go read the full report.

Vertical Software Investing Podcast With Dave Yuan (2024)

VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

We’re re-highlighting our *2024* vertical software investing podcast with Dave Yuan, Founder of Tidemark.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Having first connected thanks to their impressive benchmark data ($40 billion+ of customer pipeline under management) and hosting Guy Rubin on our podcast 2x, we are helping Ebsta (recently acquired by Fullcast) connect with software private equity investment firms to launch their Revenue Insights as a Service (RIaaS) offering:

• quarterly deep dives into your portco's sales machine,

• using a mix of AI/software (linked into CRMs, email, and call recordings)

• with a professional services element that yields this type of report (attached)

Full Ebsta RIaaS overview deck here + book a demo

LEARN MORE

Fullcast 2025 GTM Benchmarks - ICP Mix

Fullcast and Ebsta recently released their 2025 GTM Benchmarks, covering $43 billion of pipeline across 440,000 opportunities.

My #1 callout: only 23% of pipeline is high-fit ICP (Ideal Customer Profile). ~45% is medium-fit ICP, and ~30% is low-fit ICP.

This mix has improved somewhat: in 2023, ~40% of pipeline was low-fit ICP, with this trendline fitting the narrative of GTM “getting fit” after the 2022 peak.

What does the ICP fit data really mean?

Poor ICP Mix = Opportunity: The *Marketing* aspect of improved ICP targeting + eliminating GTM waste is obvious. Taking low-fit ICP from 30% to 10%, should theoretically yield 20% in areas like ad spend savings. This is easier said than done: for example, there are limited ways to gate low-fit ad clickers on Google Ads.

The less obvious (at least to non-operators) issue from a poor ICP mix is the *ongoing drag* of bad-fit deals through the sales cycle. The Fullcast benchmarks show low-fit ICP deals have 87% lower Sales Efficiency (= (Win Rate * ACV) / Sales Cycle).

Let alone their post-sales underperformance, even *if* a seller can win a low-fit ICP buyer:

or…

Poor ICP Mix = Symptom Of Crowded, Maturing Growth Industry:

Or are these poor ICP leads simply a function of overly crowded categories, causing GTM leadership - under pressure to hit often unrealistic forecasts - *needing* to target marginal-fit buyers?

VIDEO | SLIDES | NEWSLETTER RECAP

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Fullcast 2025 GTM Benchmarks - More Highlights

The Fullcast benchmarks reflect continuing market challenges:

Interestingly, the “sales velocity delta: (i.e., top rep outperformance gap) has stabilized… though it remains a “check engine light” in terms of sales sustainability (fewer AEs driving revenue = more risk):

There is a lot more in the full Fullcast 2025 GTM Benchmark report, like these excerpts below - as always, go read the full source.

Guy Rubin’s RIaaS Context + Demo

Fitting this newsletter, here is Guy Rubin’s talk at our July Value Creation Summit that covers the Revenue Insights as a Service offering.

RepVue Q3 2025 Cloud Sales Index

RepVue (h/t Ryan Walsh + Adam Little) released their Q3 2025 Cloud Sales Index.

Their data was more favorable than the Fullcast benchmarks, with quota and leadflow stable to slightly improving:

For our many investor subscribers, I would encourage you to visit the expandable category drill-downs:

… with these flags for *public* companies:

Favorable: Amazon Ads AND AWS ($AMZN), Twilio ($TWLO), Monday ($MNDY), VMware ($AVGO), ServiceTitan ($TTAN)

Negatives: Many of the top performers are private (like Databricks, Apollo.io) → with possible read-throughs to their publicly traded counterparts.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

* Disclosure: Cloud Ratings has a commercial partnership agreement with Fullcast / Ebsta

Coatue recently released their Public Markets Update (SLIDES | VIDEO) - our excerpts + takes below:

Much of the deck covered the “AI Bubble?” debate, framed against 30 bubbles dating back 400 years:

Recognizing that Return On Invested Capital (ROIC) is a crucial metric for the sustainability of any capex cycle, I found Coatue’s Microsoft Azure ROIC history slide powerful:

“Renting GPUs is a bad business” has been a common bear argument. “Commodity” infrastructure can yield 2%-5% ROICs (examples include data center REIT Digital Realty and colocation provider Equinix, as shown below).

Supported by the AI TAM scale and integrated value-add offerings (i.e., Google’s Vertex AI), my view is that this generation of AI Hyperscalers achieves more Cloud-like ROICs than Data Center REIT returns.

Or I can quote Satya Nadella from a recent TBPN appearance:

“The best day in hyperscaler business was when Amazon announced its operating margins. That’s when everybody knew hyperscalers are unbelievable businesses.

It’s a commodity, but at scale, nothing is a commodity.” - Satya Nadella, Microsoft CEO on TBPN 10/28/25

Related callout: Coatue’s ‘30e-35e forecast reflects a 20+% ROIC:

More From Coatue On An AI Bubble?

My call out from this slide: in the “AI Bubble Math” debates (like the Substack from David Cahn from Sequoia - see here and here; even more “AI Bubble Math” coverage here + here), I’ve found internal use capex to be consistently overlooked.

The Coatue slide does a good job capturing internal use AI capex with “Indirect: AI adoption in advertising, commingled with existing core revenues.” To tease internal use further here, try to picture what fully developing + *iterating* AI features for these scaled platforms would cost?

• Amazon: Adding GenAI to their core retail business (scale = $588 *billion* 2025e) and Advertising offering (scale = $75 *billion*). Let alone any undisclosed AI projects (strong competitive reasons to hide).

• Google + Facebook: At consumer scale (i.e., multiple apps at 1 *billion+* user bases), you need a lot of GPUs + datacenters to add always-on GenAI! Let alone whatever “secret moonshots” either is working on.

• Microsoft: A similar dynamic has to exist with adding GenAI to their global installed base. That said, Morgan Stanley (09/26 report with model) *only* estimates 2025e capex directly for M365 Copilot at $630 million + “Internal AI Training” at $1 billion → this example hints my internal use focus might be closer to a rounding error in a Bubble/No Bubble calculation.

Back to more meaningful AI Bubble topics:

The ChatGPT adoption curve is running way ahead of the PC and Internet cycles…

… but when using US Census Bureau data, *business AI* adoption is on an Internet / PC historical trendline. Relative to what is “priced in” for equity valuations, is that good enough?

These Coatue slides should speak for themselves:

As always, do your own work and go read the full Coatue report.

September 2025 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through September 2025 - full slides below:

B2B AI INTEREST INDEX SLIDES

B2B AI interest trends overall reversed recent weakness. Of course, beware of seasonality exiting summer + winter months.

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) reversed a summer lull.

Bellwether Microsoft Copilot accelerated in September. Other “Blue Chips” (i.e., Hubspot, ServiceNow) remain range-bound at best and small in absolute terms.

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) have seen a notable 2025 breakout relative to a very range-bound 2024. With September acclerating:

Only in slides: AI Native B2B apps (n=50) have shifted from strength to decline.

Software Investing Podcast With Joey Brookhart

FULL EPISODE: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

Given the public market theme thanks to Coatue, I wanted to highlight our recent podcast with Joey Brookhart, Co-Founder of AlphaRepo and a longtime long-short software investor, as Managing Partner and Portfolio Manager of Sandbrook Capital.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Tim Sanders + team published G2’s “A Leap of Trust: AI Agents Are Winning Hearts and Wallets” (57 slides; n = 1,000+ B2B software buyers).

My report takeaways:

• More evidence of solid AI ROI

• Surprising signs of a “risk on” mentality from buyers despite meaningful incident rates and higher-than-expected human oversight

Excerpts for the AI ROI support:

This slide inspired my “risk on” take - 83% of buyers are satisfied despite this mix of incident rates:

• Major Incident: 28%

• Moderate: 40%

• Minor: 32%

I appreciated the paraphrasing of (beyond his ‘Co-Intelligence’ book, he is the author of my strongly recommended AI digest on Substack and a Professor at Wharton):

Today’s agents are the worst agents we’ll ever work with. They get better every single day.

I interpreted the 63% more-than-expected need for human involvement as another indication of a “risk on” and “let it rip” despite challenges buyer posture:

August 2025 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through August 2025 - full slides below:

B2B AI Interest Index Slides

B2B AI interest trends continue to show some signs of *moderate weakness*.

With this moderate weakness aligning with AI/ML Prioritization in Morgan Stanley’s CIO Survey series, which peaked in Q1 2025:

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) declined for the 5th straight month.

Bellwether Microsoft Copilot ticked up in August. Other “Blue Chips” (i.e., Hubspot, ServiceNow) remain range-bound at best and small in absolute terms.

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) have seen a notable 2025 breakout relative to a very range-bound 2024. That said, interest is ~flat past quarter:

Only in slides: AI Native B2B apps (n=50) have shifted from strength to plateauing.

Curated AI Content

One of my *very* favorite AI reports: Nathan Benaich and Airstreet Capital published their 313(!) slide “State of AI Report” for 2025

Nathan + team do an excellent job digesting the broad universe of AI research - like this people-pleasing, yes-men finding:

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AI x Search Joint R&D Opportunity

For this audience, this slide is a critical topic with significant impacts on a) GTM and b) forecasting publicly traded SaaS going forward that we will be covering in depth:

We are open to *joint R&D* on this AI x Search topic with both institutional investors (as part of our quantamental Alto Model) and software vendors.

Please contact me if interested in an AI x Search R&D collaboration.

Contact For R&D Collaboration

Podcast With Godard Abel Of G2

FULL EPISODE: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

Our podcast with Godard Abel of G2 complements much of this newsletter edition.

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

SaaS Metrics Palooza 2025 Replay

Tidemark Vertical SaaS Benchmarks

Andrew Walsh previewed Tidemark’s 2025 Vertical SaaS benchmarks1. I decided to save excerpts of their excellent multi-product section when the full report comes out.

Call outs from their AI x Vertical SaaS research:

The median AI attach rate has more than doubled (2024: 22% → 2025: 59%)! While noting that attach rate definitions can vary, our read of Tidemark’s 59% for Vertical SaaS is likely a bit ahead of AI adoption rates for (more Horizontal) public companies (see our recent AI quantification summary for 20 PublicCo’s)

Unsurprisingly, AI Enabled vendors are growing faster (+8%) with higher NRR (+5%).

Dave Kellogg On “Selling Work vs. Selling Software”

Dave Kellogg (EIR at Balderton) had a thoughtful deck on “Selling Work vs. Selling Software” that gets into some of my favorite topics: *customer* ROI and how software vendors share the value creation (aka value capture + value selling):

AI Monetization

Dave Kellogg’s talk transitions well into Marcos Rivera, Founder + CEO of Pricing I/O, a SaaS pricing consultancy, on “Monetizing AI Without Getting Your SaaS Kicked” - two excerpts from his key “BAM” (Base - Allowance - Meter) framework:

Mark Roberge On Sales AI

As somewhat of a sales AI skeptic, I found Mark Roberge’s (Co-Founder Stage 2 Capital, Founding CRO Hubspot, Professor at Harvard Business School) talk to be encouraging. His framework slides here… with supporting implementation case studies (from AI portco’s MomentumIO, Letter AI, and Rally UXR) in the event replay.

More SaaS Metrics Palooza 2025 Sessions

We can’t fit everything from a 2-day event into 1 newsletter. Other call-outs to go watch in the replay:

• Jon Miller on branding (excerpt below)

• “The AI Monetization Trap: Why SaaS Leaders Must Optimize for Moat, Not Margin” - from Gary Survis + Ethan Desilva of Insight Partners

• “AI in Go-to-Market Benchmarks” - Craig Rosenberg of Scale Venture Partners

• “Inside Tech PE: What Makes an “A” Asset” - Jennifer Smith

  from Bain and Company and Katherine Zhang from OPEXEngine

Podcast With Godard Abel Of G2

FULL EPISODE: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Having first connected thanks to their impressive benchmark data ($48 billion+ of customer pipeline under management) and hosting Guy Rubin on our podcast 2x, we are helping Ebsta connect with software private equity investment firms to launch their Revenue Insights as a Service (RIaaS) offering:

• quarterly deep dives into your portco's sales machine,

• using a mix of AI/software (linked into CRMs, email, and call recordings)

• with a professional services element that yields this type of report (attached)

Full Ebsta RIaaS overview deck here + book a demo

LEARN MORE

Tracking Accenture + Microsoft

Accenture report $1.8 billion of GenAI bookings in their most recent earnings:

• +80% Year over Year

• +20% Quarter over Quarter (an acceleration from + 17% and +7% prior 2 quarters)

• 112% CAGR from Q1 FY24

• ~$1 million average AI project size (calculated via the above earnings slide)

Turning from Accenture *actuals* to Microsoft Copilot *forecasts*…

We graphed Microsoft Copilot forecasted revenue embedded within Morgan Stanley’s 9/25 MSFT upgrade note. Key points:

• 90% forecasted Copilot revenue CAGR through FY 2029

• … despite a significant deceleration in 2028 and 2029, with “growth durability” below historical software benchmarks

• That said, revenue growth from Copilot should be very frontloaded given ease of deployment within the existing Microsoft customer base

Tracking 20 Public Company AI Disclosures

The volume of public company AI disclosures has improved significantly since my aggregation in *March 2025* (see my presentation at Bowery Capital Annual Meeting):

Leveraging Quartr for recent slide decks and call transcripts across *20* public companies, I had each of Chat GPT 5 and Google Gemini 2.5 Pro *attempt* an update. *Our* content is handmade - in instances of AI-generated content, we will self disclose.

Most significant call outs:

• Workday: +50% YoY AI ARR, 75% attach rate on new deals, 30% attach rate on customer renewals

• Palo Alto Networks: +150% AI ARR

• Asana: AI Sutido ARR doubling QoQ

• NICE: +42% AI ARR, 6x increase in Copilot deals

• Samsara: emerging AI products at 8% of net new ACV

• DocuSign: IAM product line expected to be low double digit of new bookings

Full 14-page AI disclosure recap - including key quotes - here.

Curated AI Content

2 call outs from “How to Size the Market for Vertical AI” via Felicis Ventures (h/t Sundeep Peechu + Eric Flaningam):

The category mix of companies achieving a $5 billion valuation higlights the (surprisingly?) “many ways to win” in software.

I appreciated the framing by the incumbent B2B software valuation here:

Our past podcast guest Scott Brinker’s “The first generation of gen AI use cases in marketing are streaking through the Hype Cycle” included a great Marketing AI visual…

… built upon insights from SAS’s “Marketers and AI: Navigating New Depths” (n=300 orgs), including 83% of marketers reporting ROI from AI:

SaaS management platform Cledara (h/t Brad van Leeuwen) reported AI apps now constitute nearly 10% of the software stack (by app count)

Podcast With Godard Abel Of G2

FULL EPISODE: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

* Disclosure: Cloud Ratings has a commercial partnership agreement with Ebsta

Bessemer Venture Partners published their “State of AI 2025” → quick excerpts:

Focusing on gross margins - see our earlier “AI Gross Margin Drag” - two key call-outs:

• AI Supernovas (1.5 yrs to $100m): The asterisk “* For AI Supernovas, gross margins are often negative” is worth calling out. *If* AI turns out to be a bubble, negative gross margins would be an obvious signal in retrospect.

• AI Shooting Stars (4 years to $100m): If this cohort is a more representative view of “software-ish AI” going forward, 60% gross margins probably work (i.e., AI unlocks bigger workflow TAMs and gross profit absolute dollars per customer) … at the correct valuation, of course.

The BVP State of AI also included interesting predictions (I agree on the importance of browsers) and takes, like:

“Memory and context are the new moats … Persistent memory … creates emotional and functional lock-in.”

Related Reading: BVP’s “The Cloud 100 Benchmarks Report 2025”

Ebsta’s Revenue Insights As A Service

Having first connected thanks to their impressive benchmark data ($48 billion+ of customer pipeline under management) and hosting Guy Rubin on our podcast 2x, we are helping Ebsta connect with software private equity investment firms to launch their Revenue Insights as a Service (RIaaS) offering:

• quarterly deep dives into your portco's sales machine,

• using a mix of AI/software (linked into CRMs, email, and call recordings)

• with a professional services element that yields this type of report (attached)

Full Ebsta RIaaS overview deck here:

PRODUCT OVERVIEW

MIT On AI’s 95% Failure Rate

This report from MIT received significant attention for the 95% failure rate for *” embedded or task-specific GenAI”* (versus a 60% failure rate for General Purpose LLMs). Given the outlier nature here (relative to other AI ROI studies), reading the MIT report and methodology itself is advisable.

Menlo Ventures On AI

My #1 comment from Menlo Ventures’ “LLM Market Update” = the strong growth in inference is supportive of AI having ROI. Said differently, if AI was not working well enough, more spend would be concentrated in fixing models.

Model costs declining 90% per year will also help any ROI math!

July 2025 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through July 2025 - full slides below:

B2B AI Interest Index

B2B AI interest trends are showing some signs of *moderate weakness*.

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) declined for the 4th straight month. Albeit with substantial year-over-year growth versus July 2024.

Bellwether Microsoft Copilot has plateaued after an Agent product release drove interest in the spring. Other “Blue Chips” (i.e., Hubspot, ServiceNow) remain range-bound and small in absolute terms.

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) have seen a notable 2025 breakout relative to a very range-bound 2024. That said, interest is ~flat past quarter:

Driven mainly by PolyAI (“enterprise conversational assistants that carry on natural conversations with customers to solve their problems”), interest in AI Native B2B apps (n=50) has shifted from strength to plateauing:

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

* Disclosure: Cloud Ratings has a commercial partnership agreement with Ebsta

FULL EPISODE: VIDEO | AUDIO: Apple Podcasts | Spotify | All Platforms

Titled “Software Buying In The Age of AI,” we covered AI disruption across the enterprise software stack, how AI impacts software research + buying, G2’s AI strategy, and lessons in entrepreunrship from his recent Leadville 100 race (literally 100 miles of mountain biking).

ICONIQ’s “State of Software 2025”

ICONIQ released their “State of Software 2025” (73 slides, h/t Christine Edmonds + their strong Analytics team) → go read the full report here. My *excerpts* here:

My read of the *critically important* new logo metric (with more emphasis on $100m+ where percentages are more stable/durable):

• AI Natives: stunning (albeit a small sample)

• AI Enabled: good

• Non-AI: while not in “software is dead” territory… supportive of a “maturing growth industry” deserving of modest multiples

Of course, AI growth is not free. The Rule of 40 (growth + FCF%) works out to:

• <$100m - AI Native: 264%

• <$100m - AI Enabled: 57%

• <$100m - Non-AI: 15%

• $100m+ - AI Native: 58%

• $100m+ - AI Enabled: 26%

• $100m+ - Non-AI: 20%

There are two ways to read this ARR growth since AI product launch data:

• Encouraging: AI launches can drive a 10% acceleration within 2 quarters!

• Unsaid: While the amount of AI *financial* disclosures by public software companies has been improving, we should be seeing more AI-sourced acceleration in financial results… if their launches were getting *real* traction shown in the ICONIQ data.

The magnitude and consistency of AI productivity gains stood out. Particularly in GTM + Sales, where I have a bit skeptical on how *AI* could move metrics like Lead→MQL or Demo → Closed Won.

ICONIQ’s “State of Software 2025” - Messy Middle Reverses?

The acceleration in the $50m-$100m ARR cohort (77% in 1H’25 vs 46% 2H’24 + 56% 1H’24) represents a potential reversal of the “Messy Middle” dynamic we’ve covered:

The growth durability in the $100m-$200m cohort is also notable + encouraging.

My only call out from this strategic priority chart: Channel remains underprioritized relative to ROI

To be a bit dour, 3 years of 4%+ new logo growth is quite poor. As is the “stacked” 4% growth algorithm net of churn.

These last charts below that contrast top quartile versus median data captures a theme we see across many data sets at Cloud Ratings → the “best of the best” in software are practically different companies:

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Our Value Creation Summit → Replay Available

ACCESS EVENT REPLAY

With our written event recap here:

Curated Content

“Building Your Brand Moat In The Age of AI” (28 slides) - Sydney Sloan, CMO of G2

A postive Q2 2025 Flash Report from Scale Venture Partners (h/t Dale Chang + Eduard Danalache)

“Answering the AI Gross Margin Debate” - via

… alongside “Much ado about margins: The grossly overhyped AI gross margin debate” - via Janelle Teng of Bessemer Venture Partners

“Your ICP Starts as an Aspiration and Becomes a Regression” - via Dave Kellogg

About Cloud Ratings

In mid 2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

Episode Topics:

• AI across the stack: Infrastructure, data, models, and applications—where the most significant opportunities and risks lie

• Incumbents vs. startups: Why the next decade will reward incumbents with data and trust, and AI-first challengers with 10x user experiences

• G2’s AI strategy: From generative engine optimization (GEO) to G2 AI as a buying assistant

• Future of software buying: Will AI shorten shortlists? How buying cycles, transparency, and seller roles are evolving

• Marketing in the AI era: Risks of losing optimized website conversion funnels and how vendors must retool

• Endurance in entrepreneurship: Lessons from the Leadville 100 on perseverance and keeping vision through valleys

Resources:

G2 2025 Buyer Behavior Report

Godard Abel LinkedIn

Joey explains the SaaS metrics that matter most, the overrated ones investors should avoid, and why earnings day volatility often comes down to “bogeys” and positioning rather than guidance. He also introduces AlphaRepo, the Excel-integrated platform he built to track model revisions and portfolio-wide trends, and offers advice for aspiring buy-side analysts.

Episode Topics:

• Joey’s background in long-short investing and the founding of AlphaRepo

• The SaaS metrics that matter most: Net New ARR/ACV, sales efficiency, and free cash flow per share

• Overrated metrics: NDR and net customer adds when they don’t tie to real drivers

• Why earnings day reactions are driven by “bogeys” and positioning games

• Forecasting rigor: buy-side models vs. public company guidance

• Career advice: “Get at bats” with pitches and always start with primary documents

• The role of AI in buy-side workflows — an opportunity, not a threat

Memorable Quote:

On overrated metrics: “Anything that’s really backward-looking, or doesn’t tie to the drivers of the business, is noise.”

Resources:

AlphaRepo

Joey Brookhart on LinkedIn

Joey on Twitter / X: @SaasquatchC

Nick Mehta, CEO of Gainsight, shared his 64-slide deck on “10+ Mistakes I’m Trying To Avoid In Making Gainsight AI First” from the GenAI Week conference.

Some key excerpts below → as always, go read the full version:

However, this particular slide captured my attention most:

…along with his slide context (bolding = mine):

8. Charging for What’s Expected: 2 years ago, we made a very unconventional (at the time) decision within Gainsight - that our AI functionality inside our CS product should be available at no additional cost. Basic AI features are just expected now.

A Gross Margin Drag Reminder

That “no additional cost” for AI is particularly important given the higher compute (i.e. COGS) expenses from AI, well captured in the Jared Sleeper (Partner at Avenir) quote above.

This dynamic means vendors will need to better adopt value-based pricing and *value-based selling* to offset higher COGS in an AI age. I was very opinionated that *pre-AI* far too few vendors (only 33%!) adopted value-based pricing relative to their software’s customer ROI:

You can read my long-winded, analytical take on the importance of gross margins in my *2023* coverage of Coatue’s “AI Revolution” deck (h/t Sri Viswanath, Vibhor Khanna, and Yijia Lianghe)…

… which is more efficiently captured in my xkcd “Dependency” remake:

Our Value Creation Summit → Replay Available

ACCESS EVENT REPLAY

With our written event recap here:

June 2025 B2B AI Interest Index from Cloud Ratings

We’ve updated our Cloud Ratings B2B AI Interest Index through June 2025 - full slides below:

B2B AI Interest Index

B2B AI interest trends are healthy but *moderating* in June.

Thematic Category Interest (n = 47 sub-categories tracked - i.e. “manufacturing AI” or “supply chain AI”) dipped in June.

Bellwether Microsoft Copilot saw a material decline in June versus strong April + May comps. Other “Blue Chips” (i.e., Hubspot, ServiceNow) remain range-bound and small in absolute terms.

SaaS Incumbents (n=340: the same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index) has seen a notable 2025 breakout relative to a very range bound 2024. That said, June showed a downward reversal:

Driven mainly by PolyAI (“enterprise conversational assistants that carry on natural conversations with customers to solve their problems”), interest in AI Native B2B apps (n=50) has shifted from strength to plateauing with June showing a sequential decline:

About Cloud Ratings

In mid 2024, we announced a research partnership with G2 - more here:

with this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

ACCESS REPLAY

+16x Sales Velocity Case Study

Guy Rubin of Ebsta (revenue intelligence software with visibility into $48 billion+ of sales pipeline via their global customer base) presented a powerful case study from the impact of Ebsta’s new Revenue Insights as a Service (RIaaS) on a private-equity backed portfolio company:

16x increase in overall sales velocity, which is defined as = (Deal Count x Avg Deal Value x Win Rate) / (Sales Cycle), given improvements in win rates while decreasing sales cycles.

Cloud Ratings is partnering with Ebsta to expand their RIaaS practice with private equity and growth equity investors:

RIAAS PRODUCT OVERVIEW

With this 57-slide deck example showing what you + your portfolio company would receive each quarter through Ebsta’s professional service augmented by AI offering:

EXAMPLE RIAAS QUARTERLY REPORT

Note: the ideal customer profile for RIaaS has more than 20 sellers (i.e. Account Executives)

Book a demo with the Ebsta RIaaS team here:

BOOK RIAAS DEMO

More Summit Highlights

My talk focused on the need to get more quantitative, forward-looking, and apply data at scale.

Sean Saint (Head of Investment Research at People Data Labs) provided a reminder of what “scaled data” looks like - PDL covers 720 million professionals across 72 million companies.

Building on G2’s Buyer Behavior Report (h/t Tim Sanders), Kai Mitsushio’s talk (slides here) focused on how AI is impacting buying behaviors.

For our (many!) buyside readers, since G2 is a great bellwether for *B2B* search vs AI share trends, these AI disclosures (top left slide) could be useful for any Google Search investment thesis work.

Jaap Westrik (Founder of Modern Revenue) is world-class at GTM <> Finance. Hopefully these slide previews below (full deck here) get you to watch the replay of his session:

More From RepVue

Ryan Walsh (Founder + CEO of RepVue) demoed RepVue’s investor-oriented data product.

NEW: RepVue just released their Q2 Cloud Sales Index. Key excerpts here:

About Cloud Ratings

In mid-2024, we announced a research partnership with G2 - more here:

With this slide showing how our G2-enhanced Quadrants (like our recent Sales Compensation Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:

ACCESS REPLAY

This post first appeared on ’s :

Quantifying Macro Uncertainty In Software

How much is macroeconomic and tariff uncertainty impacting demand for cloud software?

Using a high-frequency top-of-funnel factor from our Cloud Ratings Alto Model, we looked to see if there were any notable variations in buyer demand across a sample of 340 SaaS vendors:

Key Observations:

• Top-of-funnel demand appears unchanged (literally 0.0% change) across our n=340 software vendor sample

• Interestingly, our subset of macro/tariff-sensitive vendors (i.e., e-commerce SaaS) has increased by +5.5% since “Liberation Week.”

• Zooming out from 2025 YTD, the broad trendline of low double-digit % growth since January 2024 is consistent with our “maturing growth industry” characterization of today’s software industry (see also our presentation at SaaS Metrics Palooza 2024)

Macro Commentary From Public Software Companies

We reviewed the post “Liberation Week” earnings and equity research conference transcripts for a *sample* of 19 software companies, 14 of which featured notable commentary excerpted below.

Key Observation: On balance, software management teams are not seeing many quantifiable macro impacts despite clear uncertainty.

The following quote from Samsara represented the most negative macro commentary:

“Q1 FY '26 was highlighted by strong top line growth and continued efficiency gains. After a strong start to the quarter, we experienced instances of elongated sales cycles on some transactions in the period following liberation day in April as some customers prioritize spending on tariff-impacted goods such as vehicles, equipment and other assets. Despite the current macro uncertainty, we're encouraged that a number of these transactions closed in May, that we generated record pipeline in Q1 and that our win rates remain generally consistent and healthy.” - Q1 FY2026 Earnings Call - June 5, 2025

Otherwise, the *observed* impacts have been negligible on average across the public software companies we reviewed.

Q: Why Is Demand Holding Up? → A: ROI

A quote from Freshworks captured why short-term demand has mainly remained resilient:

“But I have not had one customer worldwide, regardless of size, actually say we are not investing because of the macro. What they have said is, I need to make sure that this drives returns for me because I'm putting my neck on the line to drive this investment. And a lot of companies are actually looking to us to be able to invest because they are actually saving money because they're dealing with vendors that are actually more complex in terms of their human capital to actually run their systems, the licensing cost to run their systems. … Our customers see faster ROI, and then they can free up that money to be able to innovate or to put it to the bottom line. And so -- but there haven't been a lot of customers that have said, look, I can't invest with you because of the macro.” - Bank of America Global Technology Conference - June 4, 2025

Business software has consistently demonstrated positive ROI - on average a 41% IRR or 3-Year Total ROI of 278% per this “The ROI Of IT + Software” study. In a downturn, investments in software with clear paybacks will be prioritized (or at least maintained) relative to “softer, unclear ROI” line items (i.e., public relations, brand advertising).

What About AI?

Specific to 2025, AI is a strong tailwind to counterbalance macroeconomic pressures. Our B2B AI Demand Index has captured consistent growth in buyer demand:

However, for most traditional software vendors without a very clear AI winner story, AI contributes to uncertainty, as evident in data from Zylo’s SaaS Management Index on declining multi-year contracts, and this quote from Asana’s CEO:

Actionable Advice For Operators

I was surprised at the lack of macro impact, which is why you go do the actual work, particularly quantitative work from scaled data.

There is a lesson in this for operators (whether CFO or CRO or CEO):

“Human pipeline reviews can only take you so far. ‘Macro’ and ‘tariffs’ are perfect excuses for sellers, especially B and C Players. You need to be using data at scale - your sellers email inboxes, your call recordings, your CRM - to *really* know if macro is impacting your net new business.” - Guy Rubin, Founder + CEO of Ebsta (revenue intelligence software)

Our Value Creation Summit → Access Replay

ACCESS REPLAY

Better forecasting in any environment, let alone a dynamic, tariff-impacted 2025, was a key theme of our July 16th Value Creation Summit.

Macro Commentary From Public Software Companies

Our full aggregation of macro quotes is presented below:

Asana:

"So the low end of the guide is definitely taking into account being much more prudent. It reflects not just the trends that Anne called out just now, around what we're seeing, but it actually reflects additional risk and additional macro pressure, which we have not seen yet, but we wanted to provide a guidance range that, at the high end, is reflecting what we see today and then, at the low end, incorporates a potential worsening given there is a lot more uncertainty out there today than when I last guided, which was in March with our Q4 earnings.” - Q1 FY2026 Earnings Call - June 3, 2025

“And so just to be clear, on the 7% to 9% that we guided last night, the low end of that guide incorporates a worsening of the macro in terms of what we're seeing today. And we did call out some trends that we began to see really around April, and I think we're not alone there. I've seen others call out post-liberation day. And some of those trends that we've seen are slightly more elongated sales cycles, slightly smaller lands. Just a bit more buyer scrutiny.” - Bank of America Global Technology Conference 2025 - June 4, 2025

BigCommerce:

“We're keeping a close eye on the macro, certainly, and it's hard to understand the supply chains of many of our customers. Some may presume to be more obvious than others. We've not seen obvious tangible signs yet where we feel comfortable opining on it, but certainly are very consciously aware that there's some exposure there given some of the macro trends.

But to what Daniel kind of alluded to earlier, if you didn't read the press and pay attention to what was going on in the macro, there's nothing obvious in the business that jumps out where you're like, wow, there's uncertainty or any sort of perceived volatility here.” - Q1 2025 Earnings Call - May 8, 2025

BILL Holdings:

“I'll start and then let John add some more color. So I mean, if you look at what we've done to date, we've actually delivered on each that we said we were going to hit. We had to make some adjustments, we said for the fourth quarter based on where we saw the macro. And so I would say that our investments are acting as we expected. There's now a new uncertainty from the macro that we needed to factor in.” - JPMorgan Global Technology Conference - May 13, 2025

Five9:

“In the first quarter, we continued to execute well against a strong pipeline, seeing increased volume of new logo wins year-over-year despite some lengthening of sales cycles on larger deals, which we attribute to the macro backdrop.

From a geopolitical perspective, we are starting to see some resistance in international regions to doing business with U.S. vendors, but we are monitoring this very closely as we are operating in a very dynamic environment.” - Q1 2025 Earnings Call - May 1, 2025

Freshworks:

“We're not directly impacted by the tariffs, but some of our customers are. Our customer base, though, it does not skew towards any specific industry, and it doesn't skew to exporters as an example or industries that are impacted by that. We do have some customers absolutely that have been impacted. But we haven't seen that on a broad way affect sales cycles. We haven't seen it. We didn't see it in the numbers in Q1 at all. And as I said, on the call, as of April, we had not seen anything either. It's neither in the SMB side, nor in the mid-market and low end of enterprise.” - JPMorgan Global Technology Conference - May 15, 2025

“I talk to dozens of customers and they have not mentioned macro as being a major reason why they may not invest. And so I feel like I need a knock on wood just to make sure I'm not chasing myself. But I have not had one customer worldwide regardless of size actually say we are not investing because of the macro. What they have said is, I need to make sure that this drives returns for me because I'm putting my neck on the line to drive this investment.” - Bank of America Global Technology Conference - June 4, 2025

Hubspot:

“Let me start with this, and then I'll have Dharmesh step in on the agent. I'll start with the overall macro question that you have. As we have said a couple of times here, we have not seen significant changes in demand patterns, and that holds true by industry and segment and geography. Across all of those, we're seeing very similar patterns across that board. Now, look, I think there's just a broader narrative that SMBs may be disproportionately impacted by economic downturn.” - Q1 2025 Earnings Call - May 8, 2025

Klaviyo:

“Before turning to guidance, let me briefly discuss the macro environment. While potential tariffs and consumer sentiment are top of mind for our customers and for Klaviyo, thus far, we have not seen a material impact on our business. Klaviyo drives revenue for our customers from their existing consumers, which is typically a highly efficient and profitable growth channel. Should they need to scale back, many customers have told us that retention would be one of the last areas where they would reduce spending.

…As we looked at the back half of the year, we undertook extensive scenario planning and a deep analysis of our business just given the macro backdrop, and that includes looking closely at trends in operational metrics like customer KAV trends, looking at sales cycle length, all of which have remained consistent through the end of April.” - Q1 2025 Earnings Call - May 6, 2025

Okta:

“But as you know, Keith, federal contracts are 1-year deals. And so we have to renew that portion of the business every year. And so given the level of uncertainty, the heightened level of uncertainty that we see there, we're being thoughtful about that. And if you think about my macro comments that I said a couple of weeks ago, DOGE and U.S. federal was a subset underneath that macro umbrella because we do see the level of uncertainty there growing over the last couple of months.

And so we're being thoughtful about that in the guidance that we gave out a couple of weeks ago. So we're excited about it in the long run. We think short-term turbulence because there's uncertainty right now.” - BMO 2025 Virtual Software Conference - June 10, 2025

Procore:

“So I'd like to begin by addressing what's top of mind for everyone. The uncertainties and potential impacts of the tariff policies. First and foremost, I want you all to know that we have not seen any material change in our customers' behavior so far. Clearly, we are carefully monitoring this very fluid situation, and we're staying close with our customers and prospects as it develops.” - Q1 2025 Earnings Call - May 1, 2025

Salesforce:

“If you think about areas like manufacturing or consumer, clearly, how consumers were appropriately thinking about spending was something on top of mind, tariffs, clearly. But then mid-market, small business, we saw good acceleration.” - Bank of America Global Technology Conference - June 3, 2025

Samsara:

“Q1 FY '26 was highlighted by strong top line growth and continued efficiency gains. After a strong start to the quarter, we experienced instances of elongated sales cycles on some transactions in the period following liberation day in April as some customers prioritize spending on tariff-impacted goods such as vehicles, equipment and other assets. Despite the current macro uncertainty, we're encouraged that a number of these transactions closed in May, that we generated record pipeline in Q1 and that our win rates remain generally consistent and healthy.” - Q1 FY2026 Earnings Call - June 5, 2025

Shopify:

“As it relates to -- we alluded to both, and I mentioned just a moment ago that both April and May have been strong in terms of what we've seen in GMV performance. It's obviously a dynamic environment. It's still too early to tell, I think, in terms of where this is all going to play out, both in terms of the quantum and the timing of the tariffs. But again, I would say that we're roughly a month into the escalation of tariffs and we continue to see strength in GMV. But as we look at the guidance we gave in Q2, it obviously assumes continued strong performance.” - Q1 2025 Earnings Call - May 8, 2025

Snowflake:

“I am not seeing any big optimizations plan within our customers like what we saw coming out of COVID with those. But I will remind you, our customers are constantly optimizing.

That may be a little bit, but they're always looking to do things more efficiently, and that will continue. I would say in terms of the macro right now, we really have not seen the impact of anything with the current -- all the news on tariffs and other things today. I think if we would have seen that, we would have saw in the new -- number of new customers. We had a great new customer add, and we had great additions to RPO with this confidence, and that shows the confidence our customers have on making big bets with Snowflake.” - Q1 2026 Earnings Call - May 21, 2025

SPS Commerce:

“Everything going on with the tariffs is very top of mind right now for our customers and is leading to some uncertainty about not only how the tariffs will kind of impact their business and how they should react, but also, will that lead to other uncertainty or headwinds in the macro.

Now all of that said, while it's top of mind, if we look at our information around enablement programs, the pipeline for enablement programs and what we have in the business, we are not yet seeing any decline in the total volume of the pipeline nor the speed at which we're able to move opportunities through that pipeline. But I would say, given all this uncertainty, it's something we're monitoring very closely so we really understand those dynamics. But as of now, not seeing a huge impact.” - Q1 2025 Earnings Call - April 24, 2025

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