SaaS Business Models

The shift from seats to agents pressures SaaS margins. At the same time, the longstanding practice of getting enterprise customers to pre-commit and also prepay for functionality they may never deploy will get harder as CIOs look to free budget for their own LLM costs. To weather the storm, some SaaS companies have increased prices. This boosts revenue and margins in the short-term but can't be done repeatedly and creates even greater scrutiny over shelfware as procurement teams right-size and shift contracts to "pay as you go." To achieve sustainable growth, SaaS companies need to become hyperefficient at sales and marketing. Here are common ways to do so and who's doing it well: 1. PLG. Shopify and Atlassian exemplify efficient go-to-market based on product-led growth with free trials, low-friction upgrades and upsells. Their sales teams only need to get involved in the biggest opportunities at the largest accounts; every other step in acquisition, commercial transaction, activation, onboarding, and growth is self-service and automated. 2. Vertical SaaS. Guidewire Software and Veeva Systems are laser-focused on insurance and life sciences, respectively. Rather than casting a wide net, they spear-fish with deep domain knowledge and purpose-built solutions for that industry's specific workflows and regulatory requirements. Guidewire doesn't need to buy Super Bowl ads– their annual customer conference is the Super Bowl for property & casualty insurance executives. Nearly zero GTM effort is wasted– unsurprisingly they're the two most efficient on the list. We modeled Hearsay Systems after both these companies, and this focus allowed us to win incredible market share among Fortune 500 banks & insurers despite only raising $60M in totality. 3. Relocate operations to lower-cost regions and AI. This is private equity's favorite playbook to take costs out of companies they buy. Field sales continues to shift more to Zoom, which means you can hire AEs anywhere. Inside sales contributes a greater % of revenue as PLG motions are established. AI handles top-of-funnel leads qualification and generating marketing content and campaigns. 4. Focus on gross revenue retention. Because of high customer acquisition costs in #SaaS, leaky buckets are margin killers. Use LLMs to help customer success teams analyze product usage, segment cohorts, and identify opportunities to increase value realization. Put in guardrails to prevent sales reps from overselling an account, as doing so only creates churn in the next renewal cycle. 5. Introduce another product line. This only works if your new product has the same buyer as your existing products. Many SaaS acquisition pro formas fail to actualize for this reason, as it's not actually feasible to have the same AE sell both old and new products. Every SaaS company right now needs to double down on one or more of these levers in the AI era.

We're moving away from charging for *access* to software and toward a model of charging for the *work delivered* by a combination of software and AI agents. Let’s dive into what’s happening and what it means for you ⤵️ 1. The rise of disruptive AI pricing models Tech companies are realizing they can't solely rely on seat-based subscriptions in an age of AI, automation and APIs where value is disconnected with how many people are logging in. Perhaps Salesforce going all-in on Agentforce (and charging $2 per conversation) was the push the industry needed. Each product category has its own flavor of disruptive pricing. - Legal AI products might charge for a demand package generated by AI or an AI-generated summary. - Creator AI products might charge for the content that gets produced such as a video generation or amount of video created. - GTM products might charge for specific tasks completed or workflows executed by the AI. 2. Selling work, not necessarily success As a customer, I wish I only had to pay for software when it delivered results. But the reality is that true success-based billing won’t work for the vast majority of today’s products. Most products should charge for work output instead. The issue is attribution. You want the customer to get a fantastic outcome — and you want them to recognize that your product powered that outcome. As soon as you start charging for success, the customer begins to rethink the results. 3. Goodbye ARR as we know it? Shifting to these newer value-based pricing models isn't a simple pricing change you can just announce in a press release. It's a business model evolution that looks a lot like the shift from on-prem to SaaS in the first place. These new AI pricing models might mean greater volatility in both usage and spend. Variable margin profiles across products and customers. Seasonal revenue fluctuations. The potential for project-based, non-recurring use cases. Put simply, annual recurring revenue (ARR) continues to get dethroned. — Full post in today’s Growth Unhinged newsletter: https://lnkd.in/ea5eTrVD Things are about to get interesting 🍿 #ai #pricing #saas

SaaS has delivered real enterprise value—but it’s also quietly introduced dangerous concentration risk. In my open letter to the industry, I lay out why: • Security must be built in by default • The SaaS integration models have undermined foundational security practices • Convenience can no longer outpace control We’re calling on software providers, security leaders, and the broader tech community to respond—decisively and collaboratively. Read the full letter here: https://lnkd.in/eaUaRzGt #CyberSecurity #SaaS #ThirdPartyRisk #CloudSecurity #SecureByDesign #softwaresupplychain #RSAC

As a veteran SaaS lawyer, I've watched Data Processing Agreements (DPAs) evolve from afterthoughts to deal-breakers. Let's dive into why they're now non-negotiable and what you need to know: A) DPA Essentials Often Overlooked: -Subprocessor Management: DPAs should detail how and when clients are notified of new subprocessors. This isn't just courteous - it's often legally required. -Cross-Border Transfers: Post-Schrems II, mechanisms for lawful data transfers are crucial. Standard Contractual Clauses aren't a silver bullet anymore. -Data Minimization: Concrete steps to ensure only necessary data is processed. Vague promises don't cut it. -Audit Rights: Specific procedures for controller-initiated audits. Without these, you're flying blind on compliance. -Breach Notification: Clear timelines and processes for reporting data breaches. Every minute counts in a crisis. B) Why Cookie-Cutter DPAs Fall Short: -Industry-Specific Risks: Healthcare DPAs need HIPAA provisions; fintech needs PCI-DSS compliance clauses. One size does not fit all. -AI/ML Considerations: Special clauses for automated decision-making and profiling are essential as AI becomes ubiquitous. -IoT Challenges: Addressing data collection from connected devices. The 'Internet of Things' is a privacy minefield. -Data Portability: Clear processes for returning data in usable formats post-termination. Don't let your data become a hostage. -Privacy by Design: Embedding privacy considerations into every aspect of data processing. It's not just good practice - it's the law. In 2024, with GDPR fines hitting €1.4 billion, generic DPAs are a liability, not a safeguard. As AI and IoT reshape data landscapes, DPAs must evolve beyond checkbox exercises to become strategic tools. Remember, in the fast-paced tech industry, knowledge of these agreements isn't just useful – it's essential. They're not just legal documents – they're the foundation for innovation and collaboration in our digital age. Pro tip: Review your DPAs quarterly. The data world moves fast - your agreements should keep pace. Pay special attention to changes in data protection laws, new technologies you're adopting, and shifts in your data processing activities. Clear, well-structured DPAs prevent disputes and protect all parties' interests. What's the trickiest DPA clause you've negotiated? Share your war stories below. #legaltech #innovation #law #business #learning

"Can my company sell its product or service as a subscription?" This is the question that I’m most often asked by early stage founders. I wrote previously here on LinkedIn about how important it was for WHOOP to change from a hardware / one-time sale to a subscription. Here are some things to consider: 1) Do your existing customers use your product or service regularly? It’s generally hard to justify a subscription for a low engagement product. Furthermore your business will suffer if you create a business model that has high churn. You need to be intellectually honest with yourself: Are my customers getting high value on a daily or at most weekly basis? This will show up in DAU and WAU engagement data that you need to study. 2) Do you have a product that evolves?  It’s pretty hard to sell a subscription that is static. What is the roadmap for your product or service over the next 6 months? Will it continue to evolve every week? Will your customers tell you that the service is getting better? Services like Netflix, and Spotify are constantly adding new content. Subscriptions like ClassPass, Audible, and AG1 are giving you monthly products or credits. At Whoop, we’ve focused on continuing to add new functionality to the existing hardware that members already use. 3) Can your business survive the cash flow implications of being a subscription? When you go from being a one-time sale to being a subscription, there is a meaningful shift in your day 1 cash flow. At Whoop, we originally sold hardware for $500; we then changed our business model to allow for people to sign up for just $30 but pay monthly overtime as a subscription. This allowed many more people to sign up for Whoop, but it changed our cash flows. You will need to model how dramatically this change affects your business. Beware: If you have an expensive product to make, rapid growth can actually accelerate the rate at which you run out of money. 4) What subscription is right for your business? A subscription that is month to month has a higher churn rate than a subscription that renews annually. You may have a monthly subscription that’s $20 / month (or $240 over the course of the next 12 months) and decide that you should offer an annual plan at a meaningful discount, say $149 / year. The advantage to having annual plans is that they help manage your cash flows. Changing your business model to a subscription is not easy and has meaningful cash implications. But if you can do it, there’s no better way to create true alignment with your customers. If they like what you’re delivering, they’ll keep paying, which increases your long term value. And if they don’t, they’ll churn. Good luck! #subscription #retention #LTV #CAC #startups

🚫 Riyadh is NOT Dubai. If you’re using your UAE playbook to build in Saudi.. You’re setting yourself up for a very expensive lesson. I’ve seen this mistake too many times: Founders raise money in the UAE.. Then try to copy-paste the same product, GTM, and hiring strategy into Saudi. 📉 9 out of 10 times.. 🙃 It flops.. BAD. Saudi is not “just another GCC market” It has its own rhythm, behavior, and growth path. And if you don’t adapt.. you’ll bleed runway fast. Here’s a reality check from someone who’s scaled in Saudi. Not once. Not twice. But across multiple ventures. 🖐 5 Things You MUST Unlearn Before Building in Saudi: 1️⃣ The Loyalty Playbook Saudi customers expect more, Demand faster, And tolerate less. And unlike Dubai.. They’re loyal to PEOPLE, not BRANDS. Don’t win their wallet. Win their trust. 2️⃣ The Fake Localization Trap Changing currency and translating copy ≠ localization. Real localization means rethinking your: 🔹 UX flows 🔹 Payment options 🔹 Support expectations 🔹 Even your working hours Otherwise.. Your app still feels foreign. 3️⃣ Your “Proven” B2B Sales Model In Saudi, trust is still built in-person. You need people on the ground.. NOT Just Zoom links and LinkedIn messages. 4️⃣ The ‘Tech Bro’ Badge Your Y Combinator sticker?! Cool!! But if you can’t navigate GOSI, ZATCA, and Mudad.. you’re toast. Saudi investors want execution and resilience, Not Silicon Valley buzzwords. 5️⃣ The Startup Perks Trap Office baristas, Bean bags, And ping pong tables Don’t retain Saudi talent. Career growth, Ownership, And a real sense of mission does. 💠 Finally.. This isn’t about Riyadh being harder than Dubai.. It’s just different. Just like Cairo isn’t London.. And we’ve seen what happens when you forget that. (☝ If you missed that post, check the comments.) 📌 Founders: Don’t just localize your landing page. Localize: ✅ Your team ✅ Your model ✅ Your assumptions 🇸🇦 That’s how you build real, lasting success in Saudi. 💬 What’s the most surprising difference YOU experienced when launching in Saudi? Let’s hear the war stories.👇 📣 𝗕𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗮 𝘀𝘁𝗮𝗿𝘁𝘂𝗽 𝗶𝗻 𝗦𝗮𝘂𝗱𝗶 𝗮𝗻𝗱 𝗻𝗲𝗲𝗱 𝗮 𝗵𝗮𝗻𝗱𝘀-𝗼𝗻 𝗙𝗿𝗮𝗰𝘁𝗶𝗼𝗻𝗮𝗹 𝗖𝗢𝗢 𝗼𝗿 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗔𝗱𝘃𝗶𝘀𝗼𝗿 𝘄𝗵𝗼 𝘂𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝘀 𝘁𝗵𝗲 𝗹𝗼𝗰𝗮𝗹 𝗺𝗮𝗿𝗸𝗲𝘁. 𝗗𝗠 𝗺𝗲 𝗮𝗻𝗱 𝗹𝗲𝘁'𝘀 𝗯𝘂𝗶𝗹𝗱 𝘁𝗼𝗴𝗲𝘁𝗵𝗲𝗿. #SaudiStartups #MENAtech #ScalingInSaudi #OperationsLeadership

Venture Capital is changing. The old VC model - spray and pray, wait a decade, hope for a unicorn - is being replaced. The new playbook is about owning, operating, and transforming companies with AI and capital. Less passive capital, more active control. VCs are starting to look more like PE firms, just faster, tech-enabled, and more product-native. Lightspeed just registered as an RIA, and that’s not a technical detail. It’s a strategic unlock. Now they can invest in public markets, do buyouts, roll-ups, secondaries — basically act like Blackstone in a hoodie. And they’re not alone. The shift is real: 🔹 a16z – RIA since 2019 → helped take Twitter private → built a Crypto empire → Governance-heavy plays 🔹 Sequoia – changed into an Evergreen fund, not a classic VC fund model 🔹 General Catalyst – Bought a hospital system (!), building AI-native startups and dropped the VC label entirely 🔹 Thrive – launched a $1B vehicle to build + buy AI-first companies This isn’t just a trend. It’s a category shift and a fundamental rewiring of what it means to be an investor in tech. #vc #venturecapital #investment #investor #startups #PE

By 2027, your typical SaaS org chart will look nothing like it does today. Gone are the days of bloated teams, inefficient processes, and worst of all, bureaucracy. The new model is a 6-person powerhouse that operates like a 20+ person company. How? By leveraging incredibly powerful tools and agents. Here's what the org chart of the future looks like: CEO: vision, sales, strategy CTO: tech, AI integration, security Fullstack Engineer: development, integrations Product Manager: roadmap, user experience, customer feedback GTM Engineer: targeted plays, automated processes, revenue growth Head of Community: brand, content, AI-driven support This isn't just my prediction. It's happening now. Take Tally, for example. Cofounder Marie Martens recently shared they just hit $2M ARR with only 5 people. Totally bootstrapped. And they started long before the AI boom. Imagine what’s possible now! We’re going to see hundreds of other companies like Tally. These companies will embody 3 core principles: 1. Small teams can achieve outsized results with the right tools Gone are the days of throwing bodies at problems. The future is about leveraging powerful software to amplify the reach of each team member. 2. Each role must be highly versatile and impactful The new org structure demands versatility. Each role encompasses multiple traditional positions, requiring a broad skill set, and the ability to wear many hats. Generalists will thrive. 3. AI integration is crucial for scaling efficiently AI can’t just be a buzzword - it must be the backbone of this new organizational model. From automated support to AI-driven sales processes, it's the key to scaling without bloating headcount. TLDR: It's not about how many people you have. It's about how effective your people are. The future belongs to those who can do more with less. p.s. I’m fascinated by lean teams making an asymmetric impact. Who else is out there?

Salesforce just fired the starting gun on a seismic shift in how we pay for software. At Salesforce #Agentforce, they announced they’re moving away from the traditional per-seat SaaS model to a consumption-based pricing for their AI agents. This is huge. Why? Because it signals the end of paying just to have access to technology. Instead, we’re moving toward paying for outcomes—the actual value delivered. Think about it. In a world where AI agents can perform the job functions of entire departments, does it make sense to charge per seat? Probably not. Here’s what’s changing: - From access to outcomes: Companies will pay for what the AI actually accomplishes. - From subscriptions to value: Pricing adjusts based on usage and results. - From Software-as-a-Service to Agent-as-a-Service: Technology that collaborates with you as a partner This isn’t just a tweak in pricing—it’s a radical upending of commercial models for large SaaS companies. What does this mean for businesses? - Budgeting will evolve: Costs align directly with value received. - ROI becomes clearer: Easier to measure the direct impact of technology investments. - Greater flexibility: Scale usage up or down based on needs without worrying about seat counts. It’s an exciting time, but also a challenging one. Is every SaaS company ready to embrace a model where companies pay directly for the value they receive? At Uniti AI, we’ve been thinking along these lines. We price our AI agents based on the amount of work they do, not on how many seats a company has. I believe this is the future. What do you think? Is the per-seat model on its way out?

If I were a CTO in a digital health company right now…after reading the NHS 10-Year Plan? I’d focus the next 6 months doing these 7 things 👇🏼 1. Translate our product into the new care model. Hospital → Community. Analogue → Digital. Sickness → Prevention. If your tech only works in hospitals, only runs on desktops, or only reacts to problems - rewrite the roadmap. Fast. 2. Build for the NHS App. It’s not just an app anymore - it’s the front door. Appointment booking, virtual consults, long-term condition management, health data, even digital formularies - it’s all going there. If your product doesn’t plug into that ecosystem, you’ll be on the outside looking in. 3. Invest in interoperability as a feature, not a phase. The NHS is moving to a single patient record + national APIs + SNFs. Integration won’t be a nice-to-have - it’ll be the thing that gets you past procurement. 4. Map your product to actual value-based outcomes. Not “more engagement”. Not “workflow improvement”. I’d ask: Does this improve QALYs, reduce readmissions, or bend the cost curve? Can we price against those results? 5. Prepare to localise - at scale. One version won’t fit every ICS/IHO. You’ll need config frameworks, modular design, and ops playbooks that assume every rollout is a partial rebuild. 6. Prioritise trust-by-design. If you’re using AI, the bar just got higher. Transparency, explainability, and clinician control are now table stakes. Because in this system, invisible > innovative. 7. Rewrite your go-to-market for an ecosystem. You're not selling to one buyer. You’re building relationships across integrated systems, community providers, regulators, and patients - at once. This isn’t SaaS. It’s coalition-building. The NHS just handed us a map. It’s ambitious, probably flawed at this stage, and politically complex - but it’s a map. If you're building digital health in the UK today? Now is the time to align.