SaaStr 868: Software Isn't Dead. It's Gotten Harder with Scale Venture Partners' Rory O'Driscoll

Software faces a critical inflection point as the industry shifts from traditional SaaS to AI-driven agentic architectures. Currently, the AI sector operates in an "invest mode," with massive capital expenditures on infrastructure and foundation models far outpacing revenue, signaling potential market volatility. To remain defensible against dominant foundation model providers, software companies must leverage proprietary data, vertical integration, or unique physical-world applications. While "plain vanilla" SaaS workflows are increasingly vulnerable to replacement, significant opportunities exist for companies that build specialized value on top of foundation models. Success now requires a transition to agent-first product designs and a focus on either hyper-growth or extreme capital efficiency, as the market no longer rewards mediocre, undifferentiated software growth.