Investors have been pouring billions into AI companies over the past few years, as the technology continues to hold sway in the Valley and thus the world. But not all AI companies are grabbing investor attention.<\/p>\n
Indeed, even as it seems every company these days is rebranding to include \u201cAI\u201d in its name, some startup ideas are just no longer in favor with investors. TechCrunch spoke with VCs to learn what investors aren\u2019t looking for in AI software-as-a-service startups anymore.<\/p>\n
Popular SaaS categories for investors now include startups building AI-native infrastructure, vertical SaaS with proprietary data, systems of action (those helping users complete tasks), and platforms deeply embedded in mission-critical workflows, according to Aaron Holiday, a managing partner at 645 Ventures.\u00a0<\/p>\n
But he also gave a list of companies that are considered quite boring to investors these days: Startups building thin workflow layers, generic horizontal tools, light product management, and surface-level analytics \u2014 basically, anything an AI agent can now do.\u00a0<\/p>\n
Abdul Abdirahman, an investor at the firm F Prime, added that generic vertical software \u201cwithout proprietary data moats\u201d is no longer popular, and Igor Ryabenky, a founder and managing partner at AltaIR Capital, went deeper on that point. He said investors aren\u2019t interested in anything, really, that doesn\u2019t have much product depth.\u00a0<\/p>\n
\u201cIf your differentiation lives mostly in UI [user interface] and automation, that\u2019s no longer enough,\u201d he said. \u201cThe barrier to entry has dropped, which makes building a real moat much harder.\u201d\u00a0<\/p>\n
New companies entering the market now need to build around \u201creal workflow ownership and a clear understanding of the problem from day one,\u201d he said.\u00a0 \u201cMassive codebases are no longer an advantage. What matters more is speed, focus, and the ability to adapt quickly. Pricing also needs to be flexible: rigid per-seat models will be harder to defend, while consumption-based models make more sense in this environment.\u201d\u00a0<\/p>\n
Techcrunch event<\/p>\n
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\n\t\t\t\t\t\t\t\t\t\t\t\t\tOctober 13-15, 2026\n\t\t\t\t\t\t\t<\/p>\n
Jake Saper, a general partner at Emergence Capital, also had thoughts on ownership. To him, the differences between Cursor and Claude Code are the \u201ccanary in the coal mine.\u201d\u00a0<\/p>\n
\u201cOne owns the developer\u2019s workflow, the other just executes the task,\u201d Saper continued. \u201cDevelopers are increasingly choosing the execution over process.\u201d\u00a0<\/p>\n
He said any product dealing with \u201cworkflow stickiness\u201d \u2014 meaning trying to attract as many human customers as possible to continuously use the product \u2014 might find themselves in an uphill battle as agents takeover the workflow. <\/p>\n
\u201cPre-Claude, getting humans to do their jobs inside your software was a powerful moat, but if agents are doing the work, who cares about human workflow?\u201d he told TechCrunch. <\/p>\n
He also thinks integrations are becoming less popular, especially as Anthropic\u2019s model context protocol (MCP) makes it easier than ever to connect AI models to external data and systems. This means someone doesn\u2019t need to download multiple integrations or build their own customer integrations; they can just use the MCP.\u00a0<\/p>\n
\u201cBeing the connector used to be a moat,\u201d Saper said. \u201cSoon, it\u2019ll be a utility.\u201d<\/p>\n
Also, no longer en vogue include the \u201cworkflow automation and task management tools that enable the coordination of human work become less necessary if, over time, agents just execute the tasks,\u201d Abdirahman said, citing examples, mainly public SaaS companies whose stocks are down as new AI-native startups arise with better, more efficient technology.\u00a0<\/p>\n
Ryabenky said the SaaS companies struggling to raise right now are the ones that can easily be replicated, he said. <\/p>\n
\u201cGeneric productivity tools, project management software, basic CRM clones, and thin AI wrappers built on top of existing APIs fall into this category,\u201d he said. \u201cIf the product is mostly an interface layer without deep integration, proprietary data, or embedded process knowledge, strong AI-native teams can rebuild it quickly. That is what makes investors cautious.\u201d<\/p>\n
Overa, what remains attractive about SaaS is depth and expertise, with tools embedded in critical workflows. He said companies should right now look into integrating AI deeply into their products and update their marketing to reflect that, Ryabenky continued. <\/p>\n
\u201cInvestors are reallocating capital toward businesses that own workflows, data, and domain expertise,\u201d\u00a0 Ryabenky said. \u201cAnd away from products that can be copied without much effort.\u201d\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Investors have been pouring billions into AI companies over the past few years, as the technology continues to…\n","protected":false},"author":2,"featured_media":308524,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,111,139,69,8204,1046,145,12806],"class_list":{"0":"post-308523","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-new-zealand","12":"tag-newzealand","13":"tag-nz","14":"tag-saas","15":"tag-startups","16":"tag-technology","17":"tag-venture"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/308523","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=308523"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/308523\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/308524"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=308523"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=308523"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=308523"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}