SaaStr 868: Software Isn't Dead. It's Gotten Harder with Scale Venture Partners' Rory O'Driscoll

**Jason** (0:00)
But if you're compounding out to a 4X revenue multiple, is it just damn harder to do that deal than even just last November?

**Rory O'Driscoll** (0:07)
The collapse in the SaaS multiples, and you've said this, has happened because of the collapse in the SaaS growth rate. I mean, we didn't just, you know, the average company used to grow at 30% and now it's what? It's sub 10, it's 10-12. Yeah, so they're not dying for nothing. Worst is on their case because they're not growing. So you got to have confidence in your category, right? If you think it's going to blend into the undifferentiated mass of low-growth SaaS, then there's simply no point in doing it. If you're a 3X on the way to a 2X on the way to 15X, you're on the way to a 1X return, right? You just got to have category conviction. I have some that I've done where I go, I'll make money here and I have some where I go, hmm, we might just be in the white noise of mediocre.
My first conclusion is that Jason lied to me. He said it'd be a small little group to be able to chat and ask questions, not quite what I was expecting, but okay, I'll yell a little louder. And my second conclusion is I lied to Jason because I don't know what's on the agenda, but I have no intention of sticking to it. I plan to talk about literally exactly what's on my mind right now as a software investor. So who am I? My name is Rory O'Driscoll. I've been a software investor for 30 plus years, which means I'm in the sweet spot for this talk because I've been successful enough to keep my job and not so successful that I could retire and buy a football team. So I'm actually here working with you guys.
Look, the number one question that we're getting as investors is software dead, is SaaS dead? That's the question you should be asking. It's a question we're asking and as I say, if you spent the last 30 years making money in software, is software dead? Feels like a personal attack. So I'm pretty focused on this.

**SPEAKER_3** (1:52)
You're listening to The Official SaaStr AI Podcast brought to you by... Hey everybody, starting a business can get expensive fast. Web site here, email somewhere else, business phone with another provider. Northwest Registered Agent gives you a complete business identity in one place, with free tools, resources, and built-in privacy from day one. Get more at northwestregisteredagent.com/saastrfree. Get more at northwestregisteredagent.com/saastrfree.
Get more at northwestregisteredagent.com/saastrfree.

**Rory O'Driscoll** (2:26)
So what's really going on in AI, right? I mean, look, the obvious stuff at the start, obviously, winning in AI, this is something we articulated in 2018, winning AI, you're going to have this whole eat the work story. You won't just replace cloud software, you actually will replace the ultimate world work, and that's a much bigger marketplace. No points for that in 2026 We got the points in 2018 And then the other thing is, you're seeing a lot of the AI adoption being in spaces where there wasn't software before. So parts of the story are very expansive. The existing markets are getting bigger, and AI is also coming to new markets like healthcare and legal, which, let's be frank, were terrible markets for software before this. The weird thing about AI is nobody has a clue what it means, and this is my favorite stupid graph. I think this originally came from the Financial Times, and it's basically saying AI could mean anything from the end of scarcity, acute human abundance, no more need for material goods anymore to be amazing, to, on the other hand, the actual tech singularity and human extinction are somewhere in between like 2% GDP growth. This, to state the obvious, is not a particularly useful fricking slide. It covers pretty much every eventuality except we're all struck by a meteorite and die. So, it doesn't really narrow the discussion and obviously as investors you want to narrow the discussion. I have my biases, we'll come to it in a second. So that didn't help. And the funny thing is despite this complete evidence of no one knowing, a lot of this stuff was very knowable. I mean you had in 2012 you had ImageNet proof that deep learning worked. You had in 2017 proof that transformers worked. You had in 2020 the famous Scaling Law paper, which effectively said, if you put money in, in the form of compute, you get better results out and the more money you put in, the better results you get out. That was a real clue if you were playing attention, that smart people are going to spend a lot of money and make these models much better. Obviously in 2022, to make it even easier, you had ChatGPT and little reminder, sometimes things are unpredictable, but amazing. That was not what the team at OpenAI expected, it exploded and suddenly we are all paying attention. Then to make it even easier in 2024, you have the situation of awareness paper, where Leopold Trader says, dudes, these are the stocks you should buy to make a shit ton of money in the next two years. You almost can't miss because the people I know at OpenAI are going to spend a lot of money and this is the stuff they're going to buy. You can't make it any easier than that. Still, we all struggle. Here we are in 2026 and we're spending 600 and something odd billion a year in CapEx. That's big picture of what's going on and it was knowable.