SaaS in, SaaS out: Here’s what’s driving the SaaSpocalypse
Source: TechCrunch
The Rise of AI‑Powered Coding Agents and the SaaS “Build‑vs‑Buy” Shift
One day not long ago, a founder texted his investor with an update: he was replacing his entire customer‑service team with Claude Code, an AI tool that can write and deploy software on its own. To Lex Zhao, an investor at One Way Ventures, the message signaled something bigger—the moment when companies like Salesforce stopped being the automatic default.
“The barriers to entry for creating software are so low now thanks to coding agents, that the build‑versus‑buy decision is shifting toward build in so many cases,” Zhao told TechCrunch.
Why the Build‑vs‑Buy Shift Matters
The shift is only part of the story. Using AI agents instead of people to perform work also calls the SaaS business model itself into question. SaaS companies traditionally price their software per seat—i.e., by the number of employees who log in.
“SaaS has long been regarded as one of the most attractive business models due to its highly predictable recurring revenue, immense scalability, and 70‑90 % gross margins,” said Abdul Abdirahman, an investor at the venture firm F‑Prime, to TechCrunch.
When a handful of AI agents can do the same work—when employees simply ask their AI of choice to pull data from the system—the per‑seat model starts to break down.
AI Agents Can Replicate Core and Add‑On SaaS Functions
The rapid pace of AI development means new tools (e.g., Claude Code, OpenAI’s Codex) can replicate not only the core functions of SaaS products but also the add‑on tools that vendors sell to grow revenue from existing customers.
On top of that, customers now have the ultimate contract‑negotiation lever in their pockets: if they don’t like a SaaS vendor’s prices, they can more easily build their own alternative.
“Even if they do not take the build route, this creates downward pressure on contracts that SaaS vendors can secure during renewals,” Abdirahman continued.
Early Signs of Disruption
We saw this as early as late 2024, when Klarna announced that it had ditched Salesforce’s flagship CRM product in favor of its own home‑grown AI system. The realization that a growing number of companies can do the same is spooking public markets; the stock prices of SaaS giants like Salesforce and Workday have been sliding.
- Early February 2026: an investor sell‑off wiped nearly $1 trillion in market value from software and services stocks.
- Later February 2026: another $1 billion was erased in the same month.
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The “SaaSpocalypse”
Experts are calling the upheaval the SaaSpocalypse, with one analyst dubbing it FOBO investing—fear of becoming obsolete (FT article).
“This isn’t the death of SaaS,” said Aaron Holiday, managing partner at 645 Ventures, to TechCrunch. “Rather, it’s the beginning of an old snake shedding its skin.”
All quotes and data are sourced from the original TechCrunch interview and related news articles.
Move Fast, Break SaaS
The public‑market pattern is best illustrated through Anthropic’s recent product launches. The company released Claude Code for cybersecurity, and related stocks dropped. It then launched legal tools in Claude Cowork AI, and the price of the iShares Expanded Tech‑Software Sector ETF—a basket that includes firms like LegalZoom and RELX—also fell.
In some ways this was expected, as SaaS companies had long been overvalued, investors said. It also doesn’t help that these firms did the bulk of their growth during the zero‑interest‑rate era, which has since ended. When borrowing costs rise, the cost of doing business rises as well.
Public‑market investors typically price SaaS companies by estimating future revenue. But there is no telling whether, in one year or five, anyone will be using SaaS products to the extent they once did. That’s why every time a new advanced AI tool launches, SaaS stocks feel a tremor.
“This may be the first time in history that the terminal value of software is being fundamentally questioned, materially reshaping how SaaS companies are underwritten going forward,” Abdirahman said.
Adding AI features to existing SaaS products may not be enough. A horde of AI‑native startups is rising at a record pace, having completely redefined what it means to be a software company.
“Software is now easier and cheaper to build, meaning it’s easier to replicate,” Yoni Rechtman, partner at Slow Ventures, told TechCrunch.
That’s good news for the next generation of startups, but bad news for incumbents that spent years building their tech stacks.
On the other hand, the market still lacks enough time and evidence to show whether the new business models emerging from SaaS’s wake will be worthwhile. AI companies are experimenting with different pricing approaches:
| Pricing model | Description |
|---|---|
| Consumption‑based | Customers pay for the amount of AI they use, measured in tokens (each provider defines tokens slightly differently). |
| Outcome‑based | Fees are charged based on how well the AI actually works. This is the current approach of former Salesforce CEO Bret Taylor’s AI startup Sierra, a quasi‑Salesforce competitor that offers customer‑service agents. |
The outcome‑based approach appears to be working. In November, Sierra hit $100 million in annual recurring revenue in less than two years (TechCrunch).
There was once the idea that cloud‑based software like SaaS would never depreciate and could last for decades. That is still true in some ways compared with the previous generation of on‑premises software, which companies had to install and maintain on their own servers.
But being in the cloud doesn’t protect SaaS vendors from an entirely new technology rising to compete: AI.
Investors are rightfully nervous as AI‑native companies pop up, adapt, adopt, and build technology much faster than a traditional SaaS firm can move. SaaS companies are, after all, the incumbents that replaced old‑school on‑premises vendors in the last era of disruption.
This “SaaSpocalypse” calls to mind a Taylor Swift lyric about what happens when “someone else lights up the room” because “people love an ingénue.”
“The most important thing to understand about the SaaS pullback is that it is simultaneously a real structural shift and potentially a market over‑reaction,” Abdirahman said, adding that investors typically “sell first and ask questions later.”
SaaS IPOs Are on Hold
Public‑market SaaS companies aren’t the only ones feeling a chill from investors.
A Crunchbase report released Wednesday showed that, although the IPO market seems to be thawing for some sectors (see the Crunchbase article), there haven’t been—and aren’t expected to be—any venture‑backed SaaS filings on the horizon.
Why the slowdown?
-
Pressure on large, private, late‑stage SaaS firms (e.g., Canva, Rippling)
- A narrow IPO window
- High expectations driven by AI advancements
- Unsteady stock prices of already‑public SaaS companies
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Mid‑size SaaS companies are struggling to raise extension rounds in the private market, facing the same fears that public investors have.
“Nobody wants to be subjected to the volatility of public markets when sentiment can send companies into downward tailspins,” says Rechtman, adding that he expects these companies to stay private for much longer.
What’s happening on the public side?
Investors are waiting for a clear view of the finances of the first AI‑native companies that might IPO. The current scuttlebutt suggests that both
are contemplating IPOs, possibly later this year.
The likely outcome
The market will probably weave the old and the new together, as tech disruptions always have.
“Most of the new features companies are toying with these days won’t stick,” says Holiday. “Enterprises will always need software that meets compliance regulations, supports audits, manages workflow, and offers durability.”
“Durable shareholder value isn’t built on hype,” he continued. “It’s built on fundamentals, retention, margins, real budgets, and defensibility.”