Episode summary
Jared Sleeper on Which Software Companies Will Survive the SaaSpocalypse | Odd Lots
Odd Lots
· · Hosts: Joe Weisenthal, Tracy Alloway · Guests: Jared Sleeper
Summary
Jared Sleeper argues that the current software selloff is being driven by two distinct fears: software gets cheaper to build, and AI may reorganize knowledge work so radically that some current products could have little terminal value. He says the first fear is overstated, but the second is what is pressuring valuations, especially for companies that depend on long implementation cycles, customization, and enterprise buying inertia.
Sleeper describes software as more than code. Buyers are purchasing support, standardization, brand familiarity, integrations, and the messy human context around deployment. That is why products like Salesforce, DocuSign, Zoom, and Excel can remain sticky even when free or open-source alternatives exist. But he also says the risk is highest for software sold into enterprises with heavy customization, while AI-native startups may be able to win by collecting context and automating work directly.
On the bull case, Sleeper says some vendors will not just survive but expand by selling outcomes instead of seats. He points to Intercom’s AI product as an example of a company that has turned support software into an automated service. Even so, he thinks the market is right to focus on profitability, stock-based compensation, and the fact that many public software companies still have weak GAAP earnings.
Key takeaways
- Sleeper says the big valuation risk is not today’s revenue, but whether software businesses have any terminal value if AI reshapes knowledge work.
- He argues that enterprise software is sticky because buyers also pay for support, integrations, training, and herd familiarity, not just code.
- Sleeper says companies with heavy customization and implementation burden are most exposed to AI disruption, while SMBs are harder to replace quickly.
- He says AI-native vendors can charge on outcomes or intelligence, creating a new pricing model with much higher dollar revenue potential.
- He warns that many software companies still look cheap on non-GAAP metrics but have weak GAAP profitability once stock-based compensation is included.
Notable quotes
“the world is going to stay the same, but software just going to get a lot cheaper over time now that it's cheaper to build”
“the world's about to get really weird, and the way that knowledge work happens is going to change”
“there's very few folks even on the buy side who really understand how software works”
“if you're able to do that, you get much, much higher pricing in total dollars than you did before orders of magnitude in some cases”
How the episode opens
The idea of software companies value lying in being a scapegoat, essentially, for when things go wrong is, kind of funny and dystopian. I think in many ways. Yeah.
I mean, I think, you know, it's a real fear, right? And the way I think about it is there are two arguments against software right now. One is the world is going to stay the same, but software just going to get a lot cheaper over time now that it's cheaper to build.
And I think there's no one who would argue that it's not gotten dramatically cheaper to build for reasons that we laid out in our deck, and we can talk through it more. We don't buy that argument. I don't buy that argument.
But the second is the world's about to get really weird, and the way that knowledge work happens is going to change. And if we think out three or 4 or 5 years, who knows if there will even be customer support reps or sales reps or software engineers? And I think that's what's causing the kind of hit to the share prices lately.
Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal and I'm Tracy Alloway. Tracy, we're recording this February 11th and IGV, the software ETF down another 3% today.
It has been ugly in software. Everyone's throwing around the term SaaSpocalypse. I mean, the great thing about SaaS is there are a lot of things that like, rhyme with it, a lot of homonyms.
So you can you can make all those puns. Saas Crash. Yeah, exactly.
SaaS is trash. Whatever. But I'm looking at the, the share price of Salesforce.
Oh yeah. In particular because I always think of Salesforce as sort of like emblematic the poster child.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- saas valuation
- ai software disruption
- software business models
- enterprise software complexity
- docusign case study
Companies and tickers mentioned
- DOCU
- DocuSign
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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