Please find Sapphire Ventures’ latest Market Memo, “Surviving the SaaS-Pocalypse,” . In this month’s memo, we explore the sharp sell-off in software and the growing debate around AI’s impact on the SaaS model, including what’s what’s driving it, and what companies must do to adapt.

We examine how rapid advances in AI are pressuring traditional software economics while reshaping where durable value will be created going forward.

Here’s a preview:

• Software is under pressure: Public software stocks are down ~32% from recent highs, significantly underperforming broader markets.
• AI fears are driving volatility: Announcements from AI labs are triggering sharp sell-offs as displacement risk comes into focus.
• Growth is slowing: Median growth has declined for five consecutive years, while seat-based models face increasing pressure.
• AI-native players are scaling fast: New entrants are capturing value at unprecedented speed, challenging incumbents.
• The debate is intensifying: Bears see commoditization and disruption; bulls see expanding TAM and shifting value.
• Moats are evolving: Data, workflows, and distribution matter more than ever as technical advantages erode.
• Execution is critical: Winners will pair strong positioning with AI-native operating speed—while the middle ground becomes increasingly unstable.