Software Companies

“You can go into software companies and everyone kind of looks the same, but everybody at these manufacturing and factory jobs, they all have a role and they're all different.”

“The software companies are too hard to understand today with AI. I have no idea if you're solving for something that couldn't be solved now by just putting into chat GBT, right? Like so, and we're not going to spend the time to differentiate that. So, you know…”

“With software companies, You know, aside from, like, building on AWS or whatever, you pretty much own your whole stack, and so you're really fully in control of your destiny in that way. With hardware companies, you don't. Like, there's an entire supply chain,…”

“Today, I would argue return on capital is less useful. As a touchstone for does a company have competitive advantage? Because if you don't have any capital and your denominator is nothing, it's pretty easy to generate a high ratio, right? It's just math. There…”

“Software companies in the age of AI are either accelerating or irrelevant.”

“If you have 14,483 software companies, they're all trying to gain the attention of the same 2000 brands on Shopify.”

“Like, the cost structure of every software company, the COGS is not going to be, like, zero anymore for an incremental user. It's going to be, like, quite high, and it's going to be a function of inference.”

“Probably some companies will skip the design phase. I think we can skip the design phase on functionality.”

“The companies that don't have network effects are going to struggle very significantly because then there's not really a defensible moat in the pure software associated with the products that they build.”

“If you get on the AI train, if you get in the token flow, you're going to get a above market multiple. If you don't, if you slow down and it looks like every time that computational intelligence improves, Your business gets worse, then I promise you they will …”

“If you exclude the data center supply chain stuff right now, there are very few companies that are growing fast that are available for people to buy in the public markets. You know, the mag seven are all growing sub 30% at this point. You know all the software…”

“Give me 30% growth, give me profits, give me a story that's got some future in it, and I'll get you back to five times. I'll never give you 20 times again. I won't fall for that one this time.”

“If you're not making progress on that metric, as a software company, you are not with the program.”

“Software companies that sell to mining companies have a very, very hard time penetrating the sector because the issue is the, like the rate of uptake of software and of technology is actually gated by what would be the customers if you were a pure play SaaS co…”

“I became multiple software companies, highest converting either affiliate or if they were a customer of mine, YouTube became their highest grossing revenue source.”

“I think this is 100% overreaction because not all software companies are created equal, and we can talk about what the differences are.”

“Software earlier was a scale game where because you had produced a lot of software, it was cheaper for you to produce a lot of the guess what? Now everybody can produce software as cheaply as anybody else.”

“I think vibe coding is one of those minor threats to software companies in our lifetimes, and I vibe code constantly. It's a minor threat.”

“You can just see how the AI tsunami could wipe you out. If you make just two, three, four or five wrong decisions in this space, like couple wrong architecture decisions, couple wrong AI feature decisions, couple wrong API platform decisions. And you might be …”

“If you look at the earning calls and how business operate, everything is, is kind of normal. Some companies are even exceeded expectations and businesses are working great, but at the same time, The sentiment has shifted drastically, like I've never seen befor…”

“So I think at the end of the day, vibe coding is amazing technology, but I don't think it's going to disrupt software companies.”

“I feel this is like the lowest sentiment that software companies ever had.”

“But if you're not making your software for autonomous agents today, you're going to be challenged in the future. Maybe it's six months, maybe a year, maybe 18 months, but you're going to be severely challenged if you still think human beings are going to buy y…”

“Right now, if the market thinks you're just a bunch of lines of code, You're cooked.”

“I was at the conference last 10 days back, and The banking conference they said there were over 500 companies waiting to grow IPO just in the software space, which are over three hundred million in ARR.”

“I think the value creation potential in front of us is so significant that I would say that you could probably take the sum of the market cap of all the software companies today and have a pretty good bet that everything will be four to 10 X higher five years …”

“What I realized when I met a lot of other people in the tech business, all, all the companies and everything, they're engineering societies fundamentally. And I find, you can't generalize it, but there are people that aren't like that, but for the most part, w…”

“I'm low conviction that we end up, you know, five years from now with all the software companies monetizing in a completely different way.”

“And folks want the smartest folks in AI, in, in applied math and others, they only want to work on the intellectual challenges they want to work on. And if you can't deliver that, And the right boss. There's so much portability that they will just leave. And t…”

“The best companies have hostages, not customers.”

“In a 16 trillion dollar services industry, we could have companies growing faster than software companies and at higher margin than software companies. And so this pool of one trillion that VC has been fishing in has actually expanded now, maybe not to the ful…”

“Maybe one in three companies does it for a single year. Only one in 10 does it for two years. Very rarely seen re-acceleration when you're already at 50%, for God's sake.”

“Because if you're growing 15% or so, or in the teens, probably the majority is from price increases in today. That's, you know, it's fake growth. It is price increases or stuff jammed down the channel, and maybe it's a couple percent from new logos, but if you…”

“If you cut R and D in the downturn, you're probably screwed. If you don't have that compelling second product that you built in 22, 23, 24, you know, you're just in a tough place.”

“What you generally see is that companies are able to ship for some short period of time, two years, three years, and then the system ossifies and then they go and they're kind of stuck with that system. Going forward, and that's basically what they're gonna se…”

“What I will say is you need to invest disproportionately in product marketing talent. Most software companies, product marketing organizations are horrible.”

“These systems have this other effect where they're probabilistic, not deterministic... And so you can't just say, oh, deterministically, this is how much it's going to cost us. And so the companies are in this area of exploration right now, where that's causin…”

“These software companies are not meant to be owned by the same group for 30 or 40 years.”

“All these stories of software is for a certain segment of a market are skills issues, and that's exactly what they sounded like when I first heard about it. It's convenience to the company making the software to say, we are focused on one segment, and by the w…”

“There never eventually became a small number of software companies, despite what Larry Ellison and all those guys said, that there were only going to be three software companies and all that thing. Because it's kind of like, it'd be like there's only going to …”

“The way software companies need to present themselves today is as a consumer business because they're not, like, people aren't Doing, like, outreach sales one-to-one in the same ways that they were, and there's so much more competition.”

“Like, I think we're all going to increasingly look almost like professional services companies, probably to some extent, because you're bringing now solutions to the customer as opposed to just a use our software. Hopefully you have the people to implement it.…”

“As we think about incorporating generative AI into the actual operations of the software business, we can see companies getting to rule of 50, rule of 60, rule of 70, and being significantly more profitable over the next few years as these solutions get better…”

“What's interesting about software, Ted, is about 96, 97% of all software companies are private.”

“AI is going to have a massive impact on the margins of agency businesses long term. As this technology, being AI, lowers the cost of intelligence, agentic workflows that support smaller agency teams will start giving these businesses the type of leverage that …”

“It's clear to me, or at least my belief, that an American tech company that's selling a software won't have a sales tax applied for someone overseas buying that thing. So I think tech companies, software companies will be fine.”

“These software companies that are not just augmenting, but in some cases replacing the work that humans do and the budget allocated towards paying them for that work, these companies are going to get bigger, right?”

“The moats are not different, actually, at the end of the day. It's still, you still have to build good software, you still have to be able to sell, you have to retain customers, you have to But you just don't need like a thousand people for it anymore. You mig…”

“I think in our, what we see is kind of 70% of the cost structure is people.”

“If you look at the median M and a valuation for Software companies, it's, I think the last day, it's a seventy million, right?”

“Compared to everybody else who was starting software companies. I mean, by my standards, they were quite lazy.”

“And now it's not a hundred percent, but 50, 60% of these bid market private equity firms also buy software companies. Like they have a sleeve to do software.”

“Are all of our software companies going to be completely disrupted and all of them go away? And like, I don't know, like I'm taking a stand that it's they're not. But like, I guess I could be totally wrong.”

“And while it's not going to impact software companies or technology companies quite as much directly, like the end customers for a lot of these different businesses are going to be impacted in a meaningful way. And so until we get a little bit more clarity on …”

“Here we have a regression that charts AOR multiples today versus the implied AOR scale of the most recently reported quarter of a 139 different software companies. And I want to draw your attention to the r squared value of this regression... And so we see her…”

“I think everyone will have this. And then what that makes me think there's going to be some company that's built the best onboarding agent.”

“The most successful software companies we see that are most underwritable, bankable, they usually launch an agency.”

“If you wanted to rebuild Salesforce, you probably could. There's not a lot of like crazy proprietary technology there. And that's true with most software companies.”

“But in the future, we are more or less selling an employee. And like, you know, here's a very highly competent employee that is, that has specific skills, sorry, to perform in your company.”

“I publish our internal software benchmark and you see forward revenue on a software company six and a half times. That's about where it was for the last I don't know before five years ago, the last decade. So, you know, five years back, it's the 10 year averag…”