Dear founder,
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Today I want to share something that’s been on my mind ever since a conversation I had with an investor friend of mine, Tyler Tringas.
We were doing some fear setting, looking at how my business is performing, what it would look like if things went better, what it would look like if things went worse. You know, the kind of conversation with your investor and mentor that makes you really think about where you stand in the market. And while I can’t share all the personal details of that discussion, there was one part that really stuck with me – something that I think every SaaS founder needs to understand about what’s happening right now in our industry.
The Traditional SaaS Moat
For years, software as a service has been the golden goose of entrepreneurship. Founders have been building toward those beautiful acquisition multiples – 6x, 10x, sometimes 20x their annual revenue. These numbers weren’t just wishful thinking; they were based on real market dynamics.
See, there used to be a fairly sizeable moat around SaaS businesses. It wasn’t just about understanding the market you serve or having industry expertise. Building the actual technology of a software as a service business was a technical feat. It took time to get things right. That expertise was encoded in both the business model – recurring revenue, focusing on retention over acquisition – and in the technical challenge of building the product itself.
Even when I started Podscan, AI didn’t exist in the way it does now. Agentic coding wasn’t a thing. There were already LLM systems that could kind of code, but in late 2023 and early 2024, that was still on the horizon. It wasn’t there yet.
From Weeks to Hours: My Podscan Story
Let me tell you about my experience building Podscan, because I think it illustrates this shift perfectly.
When I started, I was still able to spin up a functioning, money-making business within a day or two using the Laravel framework. I had to pay for some licenses, but most of it was free and open source. I used services to help me deploy it more reliably. For a couple hundred bucks and a couple hours of work – and I’ll call myself a 1x developer, or maybe 0.8x developer, someone who can code reasonably well but isn’t a wizard – I had a running business.
It looked like a default template, but it did the job. I started indexing podcasts, making them searchable, building the first downloading system within a couple of weeks. The arduous task of building infrastructure to capture more and more of the podcasting ecosystem until I reached 100% coverage – that took a while. But initially, that first prototype was super easy to build, and that was pre-AI.
Now? Right now, I could go to Bolt, I could go to Lovable or Cursor, or Replit, or whatever agentic system you prefer. I could say: “Build me a Laravel application using Laravel 12. Implement an authentication system. I need to log in with Google. I want a Paddle account attached to this. Connect it to a SQLite database.”
I could tell the AI agent exactly that, and it would, in its agentic mode, likely give me a functioning system. There might be a couple of changes I need to make, but the AI coding systems now are so good that they’re self-linting, checking the code they wrote back into itself, verifying if that code is actually accurate. This often helps prevent hallucinations, because we don’t even see them – the checking prompt built into the agent catches them and finds a non-hallucinated version.
I can now spin up what used to take me a day or two, probably within minutes. It might take me an hour to customize the logo and whatnot, but the first initial version of a SaaS product is out in an hour. What used to take weeks, then took a day, now takes an hour.
The Acquisition Threat
Here’s where things get interesting – and a little scary if you’re a SaaS founder.
If your moat was supposed to be your skill at building a product, implementing all the features, understanding the business logic enough to build the technology, then obviously somebody else who has similar insight into your industry, who understands the challenges and problems of your potential customers, who has the customer perspective and understands what jobs they want to get done – if they can prompt AI accurately today, they’ll be at least 95% of the way to what a team of a CTO, capable designer, product owner, and industry expert would have built five years ago.
Now you can do this by facilitating AI systems. It’s extremely easy, and that moat is disappearing.
I think this has lasting repercussions for the investment and acquisition angle. Here’s the question that’s being asked in boardrooms right now: Why would you acquire a company for 10 times the revenue that company produces, if you can set aside – let’s say one times the revenue that company produces – give the project of building something similar to a technical manager or senior developer, and have a fleet of AI agents build the same thing?
I’m obviously not saying this is going to work every single time. A software business has way more than just the product and codebase attached to it. It needs a sales process, marketing process, customer support process. But if you already have these processes in-house for something similar enough that it would warrant acquiring another product – either as a financial acquisition because you want to keep it running, or as a strategic acquisition because you need those features in your own product – you’re not going to pay 10x when you can try to build it yourself for a fraction of that cost.
These conversations are happening in boardrooms right now, and that puts negative pressure on the expected multiples for SaaS businesses.
The Human Defense Strategy
So what can we do to still sell at high multiples? We need to do things that are not easily generated with AI, and that tends to be the human side of things.
First: Industry Insight That Can’t Be Trained
We need highly connected salespeople. We need industry insight that is elusive to AI systems – insight that is so specific and so earned from decades of being in an industry, so encoded in your real experiences that an AI could not have been trained on this, or at least hasn’t been trained on this yet.
There’s immense value in unique human experience and personal brand that will make something more valuable than just its technical implementation. If I build a tool and I build an audience around it, and I build a business on the overlap of my personal brand and the brand that tool represents, then that becomes more interesting to acquire because of its reputational advantage, not just its technical implementation.
Second: Strategic Integrations and Partnerships
Existing collaborative integrations into other platforms are going to be way more important. There is value in having a contractual relationship with another player in the field where they have plugged you in as one of their preferred vendors, or you are listed on their blog as the tool to solve this particular problem best. Maybe you’re featured in case studies, or you share case studies showing the relationships between your business and other successful businesses in the field.
All of a sudden, this becomes invaluable, because your product can be cloned. But the many business dinners that you went to find someone to partner with, the give-and-take negotiations to come to a mutual agreement on how a partnership should look – that cannot be done by an AI, or at least that takes more time than an AI prompt can deliver.
Third: Personal Brand and Human Connection
If you want to create a SaaS business that is protected from being easily cloned, you need to effectively do things that aren’t easily automated, and that is all relational stuff. That’s all interpersonal things that need to be deployed to protect your business from being a shallow AI copy.
Personal brand works. If you are the business that has an edge because there’s a person attached to it, people tend to check out the human one first and give it the benefit of the doubt more than the anonymous one.
I highly recommend that Software as a Service founders be public as the founders of their business. Not only will this create a positive relationship with customers, it will also put you on the map for your founder peers and investors in that community that keeps a watchful eye on people who go to conferences, who share interesting insights, who build interesting products – not just because they would like to acquire them, but because they have interesting human personalities behind them.
Fourth: The Employee Advantage
Here’s something interesting that more companies are missing: There’s a lack of serendipity and opportunity when it comes to having human employees. You often see in software development companies that people try a product because there’s a colorful or helpful or kind personality working at that company, being relentlessly themselves on social media in good ways.
It doesn’t really matter what their personality is, as long as people are showing up as their true selves on social media. The business that they work for tends to get positive attention. If you have people who have a point of view in a community, your business is going to benefit from that.
This falls flat completely if you don’t have humans as employees. If all your company does is you as a founder giving commands to an AI system – which, frankly, is what I’m doing right now with Podscan – then the opportunity for a developer that works for you to say something really cool, and people checking them out and checking out your product, and suddenly they have a friend who might use your product… that serendipity potential is completely obliterated if your AI agent is only virtual and not a real human personality.
The Artisan Approach
Standing out and standing strong against the headwind of copycats and the permanent threat of easy copy-ability that will define the next few years for Software as a Service businesses – as the multiples are dwindling due to expectations and the reality of alternative solutions – I think we will see more competitive solutions being built instead of acquisitions.
There are still going to be acquisitions, obviously, but I believe that incumbents will actually be financially capable of using extremely cheap, highly automated, but still well-controlled and managed automation tools to build things that are just good enough to be reasonably competitive with the company they would have acquired a couple of years ago.
This is my personal opinion, but I’m hearing this from my investor friends, and I’m seeing this in conversations around sales and acquisition multiples and prices and the disappointment of people where the numbers they thought they’d get are harder to reach, require more of a sacrifice, and frankly, a much more elaborate business to be sold at this point.
It’s a very interesting challenge for the next couple of years.
The Way Forward
I believe that the way out is to be a human being in a time of extreme automation. The artisan approach – or maybe just the “we’re staying human” approach – remaining relatable feels like it’s definitely the way to go.
It’s not going to be the only way to go. It’s not the only solution that helps here, and by far, it’s not enough on its own to stay afloat. But I think that’s definitely one of the things that we can do to protect ourselves and protect the value of the businesses that we create.
The future belongs to founders who can combine the efficiency of AI with the irreplaceable value of human connection, industry wisdom, and authentic relationships. The technical moat is disappearing, but the human moat – that’s something AI can’t replicate.
So as you’re building your SaaS business, ask yourself: What am I doing that only a human can do? What relationships am I building that can’t be automated? What insights do I have that come from real experience, not training data?
Those are the things that will protect your business value in this new world where anyone can build software, but not everyone can build the human connections that make a business truly valuable.
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