Jake Saper’s Post

This is what it takes to get funded in B2B right now. Barring a credible AI story, founders need to be in the top decile to get new investors across the line.

"Business porn" is the most colorful phrase I've heard to describe David Rosenthal and Ben Gilbert's amazing podcast Acquired. I've been an avid listener (and occasional lucky guest) since the beginning. The The Wall Street Journal article linked in the comments charts the insane levels of success they've achieved on the journey thus far. The single most salient thing that comes across in each episode: their passion for the material. You can literally hear them smiling with glee as they unspool each tale. If you aren't already a convert, get on the train!

Deloitte, Accenture, KPMG US, and EY did $200B in revenue last year. Founders- GenAI is your invitation to feast on that massive pie. Startups that leverage both AI and humans to deliver holistic solutions to clients are poised to outgun and outpace the services behemoths that’ve dominated for the last 50 years. Legacy providers are ripe for disruption: their business models rely on human labor and hourly billing which can be turned on its head by AI-enabled vendors. While software incumbents are having a relatively easy time adapting to the GenAI wave, services incumbents will struggle. Jessica Cohen and I put together some thoughts on where to build a disruptive AI-enabled services business (TLDR: focused on services that are highly repeatable and execution or "do it for you" focused). As well as some thoughts on how to build these businesses, based in part on our lessons from Mechanical Orchard's journey leveraging AI to move mainframe apps into the cloud. Link in comments. Would love your thoughts/company ideas!

James Evans lays out some terrific lessons on AI pricing from lived experience here. As AI gets better and is used to complete more tasks, there’s tons of excitement about outcomes-based pricing models. I explored this a bit in a post on AI pricing in SaaS from last summer (linked below). Bruno Snow and I were curious about how these models are working in practice, so spoke with practitioners across a number of SaaS companies that have experimented with pricing based on outcomes. Intercom’s Fin bot charging a $1 per ticket resolution is a great example. While there are a variety of SaaS vendors in customer support and beyond experimenting with this model, there are few screaming successes so far.  Defining and measuring success can be hard, as James notes. And attribution can be even harder- customers don’t want to pay unless clear causality is established. Which can create a weird antagonistic relationship between vendor and customer. Sales cycles should theoretically be shorter as customers pay only for outcomes. In reality, we’ve found that, thus far, the new model requires more customer touch points and data baselining, driving longer sales cycles. We’re not saying outcomes-based pricing won’t grow over time. There’s just a lot to figure out before we get there. One place where we may see the model take off sooner rather than later: AI-enabled services. These businesses take full ownership of outcomes, making an outcomes-based model a strong fit. Mechanical Orchard is a great example here. We’re finishing up a write up on the opportunity in AI-enabled services and will share shortly.

With people like Lily Lyman at the helm of the next generation of venture firms, our industry is in phenomenal hands. https://lnkd.in/gkXg-K4K

I was shocked to learn how much of our economy still runs on mainframes. Applications written in dying languages like COBOL and sitting in aging on-prem servers still power every flight you book and every credit card you swipe. The brittleness of these systems drives outages like Southwest Airline's 2022 meltdown. It's been hard to sort through the spaghetti code to modernize these apps. Until now. Rob Mee and the team at Mechanical Orchard are leveraging this GenAI to get these critical apps into the cloud and help harden our economy. In one year since founding, they're grown to double digit recognized revenue while achieving profitability- quite the feat. We at Emergence Capital are thrilled to partner with them on this journey.