Jul 15, 2026 · 37m · saastr
Software Isn't Dead. It's Gotten Harder with Scale Venture Partners' Rory O'Driscoll
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this keynote presentation and Q&A session at SaaStr, Rory O'Driscoll of Scale Venture Partners examines the structural transformation of the software industry, explaining why software is not dead but significantly harder to build and scale amid soaring AI CapEx and compressed SaaS valuation multiples.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Jason holds 4.6% of the talking time here. How this is scored →
Jason as informed peer 0.8 Guest teaching 0.3 Guest disagreement 1.8 Jason pushing back 0.4
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 33:46 Rory rejects excuses for collapsed SaaS multiples
Rory bluntly dismisses founder complaints about Wall Street being unfair, emphasizing that multiples collapsed because underlying growth plummeted below ten percent.
Hardest push from Jason ▶ 33:06 Jason challenges traditional compounding assumptionsJason refuses to gloss over multiple compression, directly asking Rory whether compounding out at a modest 4x multiple makes traditional SaaS deals unworkable.
Biggest teaching moment ▶ 33:46 Rory explains growth rate fundamentals over market sentimentRory re-educates the room on valuation dynamics, proving that public software multiple compression directly reflects collapsed 10 percent growth rates rather than irrational market hostility.
Jason holds their own ▶ 36:28 Jason synthesizes AI compute as the replacement for S&MJason asserts his own venture framework, arguing that high gross margin hits from compute are acceptable only if the product virally eliminates the need for large sales and marketing teams.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| The Historical Milestones and Inevitability of AI | 0 | 0 | 2 | 0 | Rory delivers a solo presentation reviewing the history of AI breakthroughs from ImageNet to scaling laws. Because this is an uninterrupted presentation without the host, host metrics are scored at zero. | |
| AI Invest Mode: Comparing CapEx to Revenues | 0 | 0 | 2 | 0 | Rory breaks down the massive imbalance between $688B in hyperscaler CapEx and $110B in actual AI revenues. This segment is entirely Rory presenting on stage with no host interaction. | |
| Analyzing the AI Stack: Making Versus Using AI | 0 | 0 | 1 | 0 | Rory outlines the AI stack from infrastructure, chips, and foundation models to downstream application software. The host is not involved in this monologue segment. | |
| Foundation Models Versus the Software Application Layer | 0 | 0 | 2 | 0 | Rory poses the central strategic question of whether foundation models will capture all enterprise value or leave room for specialized apps. No host participation occurs. | |
| The Software Harness and Next-Gen Application Architecture | 0 | 0 | 2 | 0 | Rory analyzes the AI harness layer, comparing it to the historic LAMP stack for SaaS development. The segment is a solo keynote monologue. | |
| Technical and Business Moats in Modern AI Software | 0 | 0 | 1 | 0 | Rory details technical and business defensibility strategies, including sensor integration, marketplaces, and proprietary datasets. Host scores remain zero as this is part of the keynote. | |
| The Fate of Pre-ChatGPT Legacy Software Portfolios | 0 | 0 | 2 | 0 | Rory breaks down the mortality rate of pre-2022 SaaS portfolios into dead on arrival, insulated, additive, and threatened tiers. No host is present. | |
| Specialized Models and Historical Platform Shifts in Tech | 0 | 0 | 1 | 0 | Rory concludes his presentation by drawing parallels between the foundation model era and previous dominant platforms like Windows and AWS. The presentation concludes without host dialogue. | |
| Q&A: Transitioning Legacy SaaS Companies to Agent-First | 7 | 3 | 3 | 4 | Jason joins Rory on stage for Q&A, drilling into how multiple compression and growth deceleration affect venture return math. Jason actively adds his own framework that AI compute spending replaces traditional sales and marketing. |
Statements from this episode (21)
O'Driscoll: Top question investors receive is whether SaaS is dead
“The number one question that we're getting as investors is, you know, is software dead? Is SaaS dead?”
O'Driscoll: Winning in AI Means Replacing Human Labor, Not Just Software
“Winning AI, you're going to have this whole eat the work story. You won't just replace cloud software. You actually will replace the ultimate world work, and that's a much bigger marketplace.”
O'Driscoll: Healthcare and Legal Were Historically Terrible Software Markets
“The existing markets are getting bigger, and AI is also coming to new markets like healthcare and legal, which, let's be frank, were terrible markets for software before this.”
O'Driscoll: Hyperscalers Spending $688B on AI CapEx Against $110B in Revenues
“We are spending in AI CapEx just among the hyperscalers
Six hundred and eighty eight billion dollars this year.
On the other hand, and that's how it takes to make AI.
Think of that as all the money, I'm very simplistic, all the money going in to just make AI h…”
O'Driscoll: OpenAI and Anthropic Revenues Won't Match AI CapEx Until 2031-2032
“The stunning thing is it takes until 2031 or 2032 before
The revenue from those two companies surpasses the total capex.”
O'Driscoll: Cerebras will be an amazing venture win in weeks
“We're going to have an amazing venture win in Cerebus in the next few weeks here, which is great, but obviously the vast bulk of the dollars have gone to Nvidia.”
O'Driscoll: Tech CapEx grew from $200B to $600B in four years
“I mean, you've gone from two hundred billion in capex four years ago to six hundred billion in capex, which means someone is pocketing four hundred billion dollars a year.”
O'Driscoll: Foundation model makers will probably continue capturing the delta value
“The truth is they are the apex predator of this distribution. They are the guys who have taken the value, the delta value, and probably will continue to do so under those forecasts.”
O'Driscoll: OpenAI and Anthropic Prove Software Is Not Dead
“What they don't mean is software dead because OpenAI and Entropic are software, and they are most definitely not dead.”
O'Driscoll: VCs Are Hedging Between Foundation Models and SaaS
“No one knows the answer and most VCs are betting both ways. They're chucking a bunch of money in at a modest 300 or six hundred billion pre at Antropic. And at the same time, they're doing a whole bunch of investments that only make sense if in fact there is r…”
O'Driscoll: Vertical AI apps combining sensors with models are highly defensible
“If you're doing kind of a combination of software and sensors, you've got something that's obviously manifestly different.
You know, you've got maybe visual sensors.
You've got touch sensors.
You got something out there that says, oh, but I ain't going to star…”
O'Driscoll: Startups built on proprietary non-public data are defensible against models
“If you have some proprietary, visibly non-public LLM data that you build your business on, and many of our companies have that, you, again, imminently defendable.
You don't have to talk about why, because they just, because the model simply can't do what you d…”
O'Driscoll: 10% of Scale's Pre-GPT Portfolio Was DOA After ChatGPT
“We did a lot of pre-AI, pre-GPT AI investing, and about 10% of our portfolio was Lilly DOA, When ChatGPT comes out, because they'd solved an AI problem that was just so much easier to solve with ChatGPT that just wasn't fixable.”
O'Driscoll: One-Third of Plain Vanilla SaaS Is Threatened by AI
“And then there's about a third way you're absolutely threatened, where you are typically what we call plain vanilla SaaS. You automate a workflow, and then you either got to move and survive, or you're going to be dead, right?”
O'Driscoll: Foundation model investments are uniquely capital-intensive in venture capital.
“There's a foundation model bets themselves, which are an order of magnitude actually two orders of magnitude, more capital intense than anything venture has done before.”
O'Driscoll: AI apps will create massive public market outcomes within 15 years.
“But then I still think there are going to be over the next 1015 years, just as Microsoft dominated the client server and PC age and was the operating system, but there were hundreds of client server apps companies that achieved successful and great outcomes in…”
O'Driscoll: OpenAI, Anthropic, and Gemini will capture oligopolistic foundation model profits.
“There's no doubt that a two-way or a three-way dominance of the foundation model category will be between OpenAI and Tropic and Gemini with maybe some other players. They will dominate that. They probably will have, you know, oligopolistic profits.”
O'Driscoll: Non-explosive LLM SaaS apps can still compound for 10 years
“There's a lot of categories where an AI, an LLM-enabled app is really good, and it's the next generation, and it's obvious what it should be, and customers are going to buy it. But it's not like going to scratch the corporate itch to use, you know, it's not go…”
O'Driscoll: SaaS multiples collapsed because average growth dropped to 10%
“The collapse in the SAS multiples, and you've said this, has happened because of the collapse in the SAS growth rate. I mean, we didn't just, you know, like the average company used to grow at 30%, and now it's what? It's sub 10. It's 10.”
O'Driscoll: Model Startups Spend 70-80% on Compute, Apps Spend 10%
“If you're doing a model company, they're probably going to allocate 70, 80% to compute. You know, if you're doing a coding company, maybe 50, 60%, you know, conversely, a lot of the apps companies I'm looking at are, if you look at it, they don't even, they al…”