SaaS stocks are currently the buying opportunity of a lifetime.
But for my startup I still use a ton of SaaS services for things that I could probably do just fine myself. (Clerk/StackAuth, Supabase/PlanetScale, Cloudflare STUN/TURN, Clickhouse, Vercel, Calendly, Google Workspace, ngrok, Tailscale).
Spiritually, I hate using these. Any one of these would be dead-simple to replace. But my time is genuinely better spent on my startup’s particular value-add. Maybe I’ll replace these some day when we can hire someone to manage internal replacement services - some of which are as easy as “a postgres database” or “wireguard on some VPS instances”. But it’s just not worth my time right now when I’m focused on building revenue.
Even if they all cost $300/mo in total, and we’re bootstrapped, it’s a lot easier to cut back on UberEats or shiny nerdy toys than it is to replace all of these SaaS offerings. I recognize there’s a lot of ”I don’t know what I don’t know” and I’m liable to subtly misconfigure something in a potentially disastrous way.
Now an LLM can do most of that, easier, and effectively for free. The first pass on a new problem is not googling to see if there's a SaaS for that, it's prompting an LLM to see if it can do it, or if it can build a tool that can do it.
Case in point: in my job we have to data-enter invoices. I have dealt with or in this industry for 30-ish years. I worked on various projects trying to get computers to read invoices, to various degrees of success. It's a hard problem; there's no standard format, or layout. Every company does its invoices differently. Some are Excel files, some are PDFs, some are Word docs, etc.
This entire problem vanished this year. You get an LLM to read the invoice. It does this more accurately than humans do. Job done.
There are entire SaaS businesses that read invoices that are now obsolete and have no moat.
I don't object to using LLMs to parse PDFs but over the long run it's going to be less efficient and reliable than other options.
Please go ahead and try parsing non-standard invoices without an LLM. I spent 20+ years on and off dealing with this problem. It's not as simple as it looks. And then LLMs came along and made it simple.
However, the hypothesis in the SaaS market is that LLMs have made software have zero value and therefore the SaaS companies will be less profitable. That’s like if wood was suddenly free, expecting home builders to go out of business. If anything, home builders are going to do better, because they can apply their expertise while deploying capital elsewhere. We should expect software companies to be more profitable, not less.
Of course, there are exceptions. Sometimes AI replaces the product itself, e.g. image generation models vs. contractors on fiverr.
Is anything down far enough to look like the opportunity of a lifetime right now?
There were some deals out there over the last few years. I still kick myself on a daily basis for not taking Carvana at $5 in 2023.