SaaS in transition: How disruption becomes value creation

At the beginning of the year, SaaS companies lost around $300 billion in market value. However, the so-called SaaSpocalypse is not a mere cyclical disruption, but rather the expression of a structural revaluation. A key driver of this development is agentic AI, meaning AI that not only provides support but also independently executes processes and implements decisions.

AI due diligence reveals that the crucial factor is how deeply a software is integrated into business-critical workflows, and whether it evolves from a supporting tool to an instance of operational execution, representing a key value driver for private equity.

How SaaS companies can secure their valuation in the Agentic era

For over two decades, the logic of SaaS remained stable: digitize workflows, scale user licenses, and unlock IT budgets. Growth followed the number of seats, and ARR dynamics were evaluated. With Agentic AI, this paradigm is shifting. AI systems no longer just support decisions; they execute processes autonomously, orchestrate across systems, and assume operational responsibility. Software is evolving from a system of record to a system of action.

For investors, this isn't a technological footnote, but a structural valuation question: does a provider remain an interface, or does it control operational execution? For example, a traditional CRM system supports sales representatives in managing leads and documenting activities. A system with execution authority, on the other hand, can independently trigger next steps, generate offers, or automatically manage follow-ups. For SaaS companies, this new reality presents two strategies: protecting and expanding the Total Addressable Market (TAM).

Strategy 1: Protect TAM. Build a structural defense capability

Companies with structurally stable valuation multiples are deeply embedded in business-critical processes and control the underlying core data. They act as a single source of truth for transaction-relevant processes and are integrated with ERP, CRM, HR, or finance systems. Crucially, not only is the technical integration important, but also the structural one: governance mechanisms, authorization structures, and regulatory control requirements must be an integral part of the product architecture.

This creates a sustainable competitive advantage, especially in regulated industries. Generic AI agents can automate user interfaces, but they don't readily replace historically developed rule sets, versioned data histories, complete traceability, and special cases codified over the years. Therefore, in AI due diligence, investors are increasingly examining whether the target company actually controls core operational processes or merely provides their user interface. Without structural integration, every AI initiative remains vulnerable, as generic AI agents can easily replicate and replace software functions at the user interface level.

Strategy 2: Expand TAM. Take the step towards becoming an Execution Authority

Besides protecting the existing position, this opens up a strategic option for expansion. The decisive lever here lies in the transition from supporting software to autonomous process execution.

Autonomous AI systems interpret context, make rule-based decisions, and execute processes within defined guardrails. This shifts the monetization focus from seat-based models to outcome- and automation-based logics. For example, a traditional HR system is licensed per user and supports administrative tasks. A system with execution authority can independently manage recruiting processes, pre-qualify candidates, and coordinate interviews. Value is therefore no longer generated by the number of users, but rather by the number of positions filled or the number of process steps automated.

For SaaS companies, this means a systematic evolution towards the execution layer: processes are not only documented but actively orchestrated. Furthermore, every automated process execution leaves behind structured data that can be used to make decisions more precise and processes more efficient. This interplay of workflow depth, operational decision-making authority, and data-driven feedback forms the basis for sustainable TAM expansion into operational (OPEX) budgets.

For private equity investors, this has direct valuation implications: High gross retention signals structural integration. Net revenue retention above 110–120% indicates growing workflow penetration and expansion from existing business. EBITDA margins of 25–35% show that automation is scalable, embedded in the product, and not just implemented on a project basis.

Execution Authority as a new benchmark for evaluation

The SaaSpocalypse is not a general market collapse, but rather a selection mechanism. Interface-centric models are coming under pressure because their differentiating features are increasingly replicable through generic AI functionalities. Platforms with Execution Authority, on the other hand, can protect or even expand their TAM.

Agentic AI is not an innovation project on the periphery of the organization. It fundamentally changes business models, monetization, and control logic. Companies that solidify their position in business-critical workflows and take the step toward operational process control actively shape this reassessment, rather than being driven by it.

This raises a key evaluation question for investors: does the company control business-critical processes, or is it limited to the user interface?

This article was originally published in Private Equity Magazin.