×
AI is producing thousands of new SaaS companies, and renewed interest in forgotten sectors
Written by
Published on
Join our daily newsletter for breaking news, product launches and deals, research breakdowns, and other industry-leading AI coverage
Join Now

AI’s transformative impact on SaaS: The rise of artificial intelligence has sparked a significant surge in competition across various software-as-a-service (SaaS) categories, with thousands of new AI-driven startups entering the market.

  • Venture capital investments in AI have fueled the creation of numerous new competitors in previously established SaaS categories.
  • Entrepreneurs are leveraging AI technology to reimagine and disrupt existing software solutions across industries.

The emergence of AI-native platforms: Traditional SaaS companies are facing competition from a new wave of AI-first startups that are positioning themselves as innovative alternatives in various sectors.

  • Sequoia Capital described Drift, a new AI-powered customer success startup, as having no competitors, highlighting the distinction between AI-native platforms and established players.
  • While existing companies like Gainsight, ChurnZero, and Vitally operate in the customer success space, they may not be considered direct competitors from a venture capital perspective due to their lack of an AI-first approach.

Unprecedented competition in SaaS: The influx of AI-driven startups has created a highly competitive landscape, even in previously stable markets with few competitors.

  • A SaaStr Fund portfolio company crossing $100 million in annual recurring revenue (ARR) is now facing approximately 100 AI-native competitors, according to a corporate VC board member.
  • This surge in competition is pushing established companies to innovate and improve their offerings, ushering in an era of “Hyperfunctional SaaS.”

Revitalization of previously overlooked industries: AI has breathed new life into sectors that were once considered uninteresting or out of fashion for investors.

  • Search APIs, such as Algolia, have become one of the hottest areas in the AI world, despite limited interest in 2014.
  • Call center technology, exemplified by companies like Talkdesk and Gorgias, has seen a resurgence with the advent of AI-powered voice agents and customer service solutions.
  • Sales tools, once a neglected category, now boast hundreds of AI-driven solutions targeting various aspects of the sales process.
  • Legal tech, previously considered a “No Invest” space, is now attracting significant venture capital interest for AI-powered tools designed for lawyers.

Disruption in established categories: Even SaaS categories that were thought to be mature and settled are experiencing renewed competition and innovation.

  • Customer Relationship Management (CRM) and Customer Success, once considered “done” categories, are now seeing an influx of AI-first startups challenging established players.
  • The explosion of AI-driven functionality and automation has led to unprecedented levels of creativity and competition across various SaaS sectors.

Implications for existing SaaS companies: The rapid proliferation of AI-powered competitors presents both challenges and opportunities for established SaaS providers.

  • Existing companies may be able to rely on their net revenue retention (NRR) for a while, but they will need to adapt to the changing landscape to remain competitive.
  • The mantra for established SaaS providers becomes “step up, or step aside” as they face pressure to innovate and incorporate AI capabilities into their offerings.

Looking ahead: As AI continues to evolve, its impact on the SaaS industry is expected to grow, potentially reshaping entire categories and creating new opportunities for innovation.

  • The current wave of AI-driven competition is likely just the beginning, with further disruption and transformation expected in the coming years.
  • SaaS companies that can successfully integrate AI capabilities and adapt to the changing competitive landscape will be better positioned for long-term success.
One Thing is Clear: AI Is Leading to 1000+ New Competitors in SaaS

Recent News

Nvidia’s new AI agents can search and summarize huge quantities of visual data

NVIDIA's new AI Blueprint combines computer vision and generative AI to enable efficient analysis of video and image content, with potential applications across industries and smart city initiatives.

How Boulder schools balance AI innovation with student data protection

Colorado school districts embrace AI in classrooms, focusing on ethical use and data privacy while preparing students for a tech-driven future.

Microsoft Copilot Vision nears launch — here’s what we know right now

Microsoft's new AI feature can analyze on-screen content, offering contextual assistance without the need for additional searches or explanations.