Assertion Not checkable as stated
Tunguz: AI app gross margins will expand as inference costs drop 95%
“And when we were looking like a typical software companies, probably at 75% gross margin. Yeah. AI software application companies are like a zero to 30%, and now their single biggest cost has been reduced by 95% overnight, and they didn't have to do a thing.”
Prediction Not checkable as stated
Tunguz predicts AI startup margins and multiples will match classic SaaS
“Before they used to have Challenging gross margins. And now they'll probably look the same as SaaS companies, which means you have pretty significant multiple and valuation expansion.”
Insight
Tunguz: Software startups tripling growth without AI are a hard sell
“If you're tripling, doubling without AI, it's a hard sell.”
Insight
Tunguz: AI is in a "Groupon era" where GTM outpaces product differentiation
“It's a Groupon era for AI where one company takes off and then there are 15 to 20 others because you're wrapping the API, you have a lot of capability out of the gate, and then long-term product differentiation probably matters less than go-to-market execution…”
Prediction Open · timeframe Jan 2028
Tunguz: Enterprise app counts will flatline while total software spend rises
“And so I think maybe what we see is application count stays flat or maybe even decreases, but the total amount of software spending increases because it's capturing some fraction of that labor spend.”
Insight
Tunguz: The 20-year SaaS go-to-market playbook no longer applies
“The playbook that we've built over the last 20 years, basically no longer applies. And we need to re-instrument and re-determine what this new world looks like.”
Assertion Contradicted
Tunguz: Series A ticket size valuations increased 42% over two years
“In fact, valuations at Series A ticket sizes have increased 42% in the last two years.”
Insight
Tunguz: AI agent startups struggle in mid-market compared to PLG and enterprise
“We see most AI agentic software companies, people who are selling software that replaces labor, they either sell at the bottom, PLG, bottoms up, or they sell at the very top. Mid-market is much harder.”
Assertion Supported
Tunguz: Founders expect valuations to match 2022 and 2023 levels
“They expect their valuations to be the same as in 2023 and the same as in 2022.”
Assertion Not checkable as stated
Tunguz: SaaS survey shows AI has no impact on ARR growth
“AI today has no impact on conversion rate, has no impact on ARR growth, even though people who buy AI perceive it as a meaningful contributor to their overall efficiency gains.”
Assertion Not checkable as stated
Tunguz: AI buying barrier shifted from security to ROI
“Six months ago, we were asking them, what is the number one prohibition, the thing that inhibits you from buying AI? Six months ago, the answer was security. Today it's ROI. People are struggling to find exactly the value that AI systems are building.”
Assertion Not publicly verifiable
Tunguz: Pricing model drives statistically significant performance differences in software
“There's actually a statistically significant difference in the underlying performance of these businesses as a function of their pricing model, irrespective of the layer in the stack.”
Assertion Partly supported
Tunguz: 81% of peak venture dollars came from non-traditional VCs
“US venture funding has gone from eight to 300 over 15 years. It's now falling to about a 150 because 81% of the dollars invested in venture capital at the height of the boom came from non-traditional venture capital firms who are all very likely to leave.”
Assertion Not checkable as stated
Tunguz: Public company signed $100M infrastructure deal with under 3% utilization
“There's a friend of mine who is part of a cost cutting exercise at a major publicly traded company. They had signed up a three year, a hundred million dollar infrastructure deal with less than three percent utilization.”
Assertion Partly supported
Tunguz: Hybrid seat-and-usage pricing yields 3x net dollar retention growth
“If you're using a combination pricing model, in other words, seats plus usage, three X the growth in that dollar retention as somebody who's using any other form of pricing.”
Prediction Not checkable as stated
Tunguz: AI will transform vertical SaaS at cloud computing scale
“The big theme about machine learning is, it's going to change the world of SAS because all of a sudden, it's not just, The machine learning innovations will happen in the core categories that we've seen in the past. Those horizontal companies selling to custom…”
Insight
Tunguz: AI algorithms are commoditized; startups must build proprietary datasets
“The algorithms themselves are not that innovative. They're not that close source. So you, we're going, the company that's going to really innovate is going to need its own data set to be able to train its own models.”
Insight
Tunguz: AI innovation alone fails without a strong go-to-market advantage
“A machine learning innovation, in, in and of itself, is not enough to generate substantial customer demand. It has to be able to change the go-to-market.”
Insight
Tunguz: AI technology advantages do not automatically lower customer acquisition costs
“Like, let's say you know, you create the next version of Zendesk that's got a whole bunch of ML. It's not necessarily that that technology, you know, that Intel inside technology is going to all of a sudden reduce your cost of customer acquisition relative to …”
Assertion Supported
Tunguz: Lead VC check sizes are up 42% in 18 months
“Right, but check sizes are up, the lead check sizes are up, 42% in 18 months.”
Prediction Not checkable as stated
Tunguz: 95% cheaper AI models will drive 10x-100x usage increases
“If DeepSeq like models with great reasoning, and 95% cheaper. Not for companies will just like 10 X or a hundred X the use and probably keep the margins the same to get to a much better user experience. As a way of differentiation, right?”
Assertion Not checkable as stated
Tunguz: Series B through D VC funding market is starting to recover
“After 2022, the series B through the D market was effectively dead and it's starting to come back.”
Disclosure
Tunguz: Portfolio startup keeping engineering headcount flat using AI IDEs
“We have one company growing really fast. Engineering headcount year over year will be flat. Because they deploy some AI enabled ID and they can write a lot more software.”
Assertion Not checkable as stated
Tunguz: AI for sales lead analysis works accurately 80% to 85% of the time
“But if I use ChatGPT or OpenAI or a call recording software to determine what's going on with a lead or customer prospect, state-of-the-art says it'll work somewhere between 80 to 85% of the time.”
