In this month’s memo, we unpack how AI is reshaping the software ecosystem—from the growing divide between AI-enabled incumbents and AI-native companies, to the organizational rewiring required to keep pace with today’s innovation velocity.
Here’s a preview:
- AI-native ≠ founding date: We clarify why AI-native is defined by AI-centricity across culture, operations, data, and innovation speed, not by when a company was founded.
- Incumbents are struggling to compete: Despite advantages in data, distribution, and customer relationships, established software companies are finding it difficult to drive adoption of their AI offerings, while AI-native challengers are gaining traction and developer mindshare.
- A new operating blueprint is emerging: The companies making real progress share six traits—top-down urgency, bottoms-up experimentation, flatter org structures, faster release cycles, willingness to endure business model transition pain, and a deep data-centric culture.
- Proof points are mounting: Companies like Intercom, Databricks, Replit, Notion, Gong, and ClickUp show what’s possible, with examples including 50%+ AI add-on adoption, 400%+ YoY AI sales growth, and rapid ARR reacceleration.
- M&A momentum is building: Incumbents and late-stage startups, including Workday, Databricks, Meta, OpenAI, and others, are accelerating acquisitions to bring AI-native capabilities in-house.
- Competition is shifting: Faster fast-following, collapsing feature differentiation, and emerging conflicts across new agentic workflows are reshaping category boundaries.
We also spotlight notable AI raises, infrastructure and cybersecurity activity, and our recommended best reads on global AI trends, IPO momentum, and enterprise architecture shifts.