Perspectives on SaaS + AI presented at Bowery Capital's March 2025 Annual Meeting
Bowery Capital AGM March 2025
PRESENTED BY
Themes From My 2024 Bowery AGM Slides
Social Attribution: @CloudRatings + @SaaSletter
Models Improving Rapidly
OpenAI ~3x Better In 2.5 Years
xAI ~3x Better In 1 Year
Social Attribution: @CloudRatings + @SaaSletter
Model Costs Declining Rapidly
“ Cost decreases by 10x every year ” - a16z
42 MMLU = ~High School 83 MMLU = ~Masters to ~PhD
~$0.75 To Write A Long Book Open Source Model (Meta)
~$0.08 To Write A Long Book Is A Book Written By A High Schooler Negative Value? Open Source Model (Meta)
Social Attribution: @CloudRatings + @SaaSletter
B2B AI Interest Index Viewpoints Mixed
Social Attribution: @CloudRatings + @SaaSletter
AI Disclosures = Improving But Early, Especially $
REVENUE
CUSTOMERS
~ATTACH RATE
100% 100%
0%
0%
70%
0%
50%
0%
36%
30% 30%
20%
18%
0%
9% 9% 7%
5% 3%
4% 2%
2% 2% 1%
o365 Comm
Ent Rev
0%
Social Attribution: @CloudRatings + @SaaSletter
AI Contributes To Uncertainty “And then that all couples with what I think is massive uncertainty in the economic environment and then also just with how AI is going to play out . So we've been talking a lot about this idea lately that the coming wave of AI transformation is even bigger than what people have been calling digital transformation for the past 10 years. And I think that some enterprises are trying to figure out whether and where it may actually leapfrog their digital transformation , and it would actually be kind of a waste of time to invest in a technology that's just going to be sort of obsoleted by something else in 1 or 2 years. ”
- Q2 2025 Earnings Call (09/03/2024)
Social Attribution: @CloudRatings + @SaaSletter
It Always Comes Back To ROI
Social Attribution: @CloudRatings + @SaaSletter
Too Early to Tell Studies Are Showing Solid AI ROI
Little to no ROI (<5%) Significant ROI (20+%)
Some ROI (5-20%)
Significant ROI (20+%)
3%
13%
21%
29%
42%
42%
Largely 5%-20% Productivity Gains
63%
59%
58%
26%
42%
57%
32%
11%
13% 8%
13%
21%
17%
14%
10%
6%
Product + Engineering
Information Technology
Marketing
Sales
Finance
Operations
N=51
N=50
N=36
N=36
N=22
N=40
“Tech users report an average productivity gain of ~15% across use cases”
“As a result, Tech companies have seen a ~10% impact on their bottom line from using GenAI”
Cloud Ratings analysis of ICONIQ Growth’s “State of AI” Report. Social Attribution: @CloudRatings + @SaaSletter
AI ROI Especially Strong For Larger Companies
Social Attribution: @CloudRatings + @SaaSletter
AI Usage - Last 2 Weeks - By Employee Size
Below 50
50-99
100-249
250+
14%
250+ Employee
12%
10%
8%
6%
4%
2%
0%
Social Attribution: @CloudRatings + @SaaSletter
AI Usage - Last 2 Weeks - By Sector
Information
Finance
Prof / Sci / Tech Services
Manufacturing
Education
Healthcare
25%
20%
Information
15%
10%
5%
0%
Social Attribution: @CloudRatings + @SaaSletter
Too Narrow?
Fast Enough?
75% of Tasks From 4% of Occupations
Social Attribution: @CloudRatings + @SaaSletter
AI Usage - Last 2 Weeks - By Employee Size
Below 50
50-99
100-249
250+
Internet - 1995+ History
PC - 1981+ History
60%
50%
40%
30%
20%
10%
0%
Social Attribution: @CloudRatings + @SaaSletter
AI Usage - Last 2 Weeks - By Sector
Information
Finance
Prof / Sci / Tech Services
Manufacturing
Education
Healthcare
Internet - 1995+ History
PC - 1981+ History
60%
50%
40%
30%
20%
10%
0%
Social Attribution: @CloudRatings + @SaaSletter
Unbounded Task TAMs “ In some end markets, the size of the task TAM is unbounded, meaning that a substantial increase in low-cost human hour equivalents would drive a corresponding increase in business value. For example, software development has an unbounded task TAM. There is value to a business in creating a lot more software, assuming it is useful software. Another example of an unbounded domain is design. There is value to a business in having a wider funnel of new ideas to test and iterate upon. This isn’t true for every end market of course . Increasing the number of tasks in the financial close process would likely not create much business value. But, the point is that the AI opportunity is likely a lot larger for software than is currently being contemplated. ” - Buck On Software - “Winds Of Change” (06/20/2024)
Social Attribution: @CloudRatings + @SaaSletter
Graph: US-Wide Private Fixed Software Investment / Software Industry Developers: Price / Technology Quality Adjusted Nominal “Unbounded” + Software Developer Value Added
“For example, software development has an unbounded task TAM . There is value to a business in creating a lot more software , assuming it is useful software.”
Price / Quality Gap Rises -> Better Software Too
‘05-’07 ‘08-’10 ‘11-’13 ‘14-’16 ‘17-’19 ‘20-’23
‘87-89 ‘90-’92 ‘93-95 ‘96-’98 ‘99-’01 ‘02-’04
Source: Redacted Cloud Ratings Quantitative Research Social Attribution: @CloudRatings + @SaaSletter
Many Hidden AI Opportunties
DATA STORED ON PREMISE
EXAMPLE: AGAVE FIELD DATA?
SMB Enterprise
60%
50%
52%
47%
47%
40%
40%
38%
30%
30%
20%
10%
0%
2020
2022
2024
+
Cloud Ratings analysis of 2020 + 2022 + 2024 Flexera “State of the Cloud“ reports. Social Attribution: @CloudRatings + @SaaSletter
AI = Winning The Next Game
"It's not small sales teams with credit cards that can go swipe. It's actually the market-leading companies that like winning because they see AI and think, ' We won the last game, and now AI helps us win the future . How do we get AI to as many people in our organization as possible?' "
INTERNAL
EXTERNAL
Matt Slotnick Co-Founder + CEO
When selling AI in 2025 -> ICP = Winners + Leaders
Reminder: ICP Win Rates Are 3x via
ON OUR PODCAST:
Source: McKinsey, Ebsta, Poggio Social Attribution: @CloudRatings + @SaaSletter
Key Messages It Always Comes Back To ROI -> Solid Early Returns
AI Adoption Signs Positive ... But Not Perfect
“Unbounded” Task TAMs -> More + Better Software
Winning The Next Game -> What Would You Do In 1997?
Matt Harney matt.harney@cloudratings.com saasletter.com
About Us
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QUADRANTS
INDICES
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SAAS DEMAND INDEX
METHODOLOGY: PUBLIC DATA ENHANCED WITH PRIVATE VENDOR DATA VIA ANALYST RFI
SAAS EMPLOYMENT INDEX
OPERATOR PODCAST
B2B AI INTEREST INDEX
INVESTOR PODCAST
PARTNERSHIP: ENHANCED WITH G2 DATA FOR ROI + IMPLEMENTATION + CUSTOMER MIX
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