Navigating the SaaS-pocalypse Part 1: Do We Panic?

If you work in SaaS right now, your inbox is full of people telling you the world is ending.

In early February about 300 billion dollars was wiped out from public SaaS stocks valuations.

Yesterday, Block the (parent company of Square, Cash App, Afterpay and others) fired roughly 50% of their 10k+ staff.

So yes, a lot is going to change.

But I think the most important thing to understand is this: the game isn't changing.

The fundamentals of how businesses are built, how money is made, and how competitive advantages are protected have not changed.

What AI is doing is reshuffling the deck on how you execute against those fundamentals — faster and more aggressively than anything we've seen since the internet.

This mini series is about navigating that shift without losing sight of what actually matters.

The impact of this change will be massive, however we are all still playing the same game.

1. Find a successful arbitrage

2. Focus on improving Acquisition, User Value, Monetization

3. Build Defensibility via the 7 Powers

AI’s Impact Will Be Larger Than the Internet

The below quote from Marc Andreessen really hits home. In the last 30 years, arguably no one has been close to the center of tech than he has.

Founded Netscape, Started A16Z, on the board of Meta/Facebook.

When he says AI's impact will dwarf the internet, it's worth taking seriously.

But "take it seriously" doesn't mean panic. It means understanding what is actually changing — and what isn't.

All Business is Arbitrage. This Doesn’t Change

Making money is simple, not easy. All business is arbitrage of some form.

Your company:

1. Takes some inputs

2. Does something do them

3. Sells the output for (hopefully) more than they cost.

In the "old days," traders bought something in one place, put it on a ship, and sold it for more somewhere else.

Manufacturing companies take raw materials, transform them into parts, assemble them, and sell them for more than they cost.

In the software world, we find a problem, hire a development team, load them up with caffeine and snacks, and sell recurring subscriptions until we're profitable.

All Arbitrages Shrink With Time

Arbitrages don't last forever.

If there's a way to spend a dollar and get $2–10 back, people find out. The early winners grow big, people notice.

Blogs get written, consultants show up, courses get created, and the ROI compresses.

Building SaaS around important, nuanced problems has been one of the great arbitrages of the last decade.

Find a problem, hire the right people, build recurring revenue — and you could command a 10x ARR valuation in a few years.

Lots of founders made millions of dollars with that play.

If you look at this chart of Sass public market valuations, you see a classic bubble form and then pop.

A Brief History of Arbitrages

Big companies are built when they find these arbitrages, but they don’t last forever.

In the last ~15 years, we’ve seen roughly these windows open and these “plays” develop

2013–2016: Facebook Ads CPMs were dirt cheap before the algorithm matured. Early e-commerce and app companies scaled massively on $0.01–0.05 clicks. The window closed as iOS targeting improved and competition flooded in.

2014–2018: Content SEO / Programmatic SEO Google was still rewarding volume. Companies like NerdWallet, Credit Karma, and later SaaS tools like HubSpot built massive moats by publishing at scale. Programmatic SEO (landing pages from databases) was particularly high-ROI before helpful content updates.

2015–2019: Instagram Influencers Before disclosure rules tightened and rates inflated, micro-influencers drove extraordinary ROAS. DTC brands like Gymshark and Fashion Nova were built almost entirely on this.

2016–2020: YouTube Ads Severely underpriced relative to attention. Direct response advertisers (info products, supplements, SaaS) printed money while TV budgets hadn't shifted over yet.

2017–2021: Podcast Ads CPMs were low, audiences were highly engaged, and attribution was primitive enough that brands got more credit than they deserved — which ironically kept prices low longer.

2018–2022: TikTok / Organic Short Video Massive organic reach in the early algorithm. Brands and creators who jumped early got outsized distribution before it normalized to pay-to-play.

2019–2022: Product-Led Growth / Freemium Not a channel, but a go-to-market arbitrage — Slack, Figma, Notion used free tiers to bypass sales cycles and captured enterprise from the bottom up before incumbents adapted.

2020–2022: Apple Search Ads Post-ATT (2021), Facebook targeting collapsed and ASA became undervalued briefly as the supply/demand balance hadn't adjusted.

2022–2024: AI Content + SEO Short window where AI-generated content at scale ranked before Google's helpful content updates closed it. Companies that built authority before leaning on AI retained rankings; pure AI farms got burned.

2023–present: AI Agents / Workflow Automation Still early. Building internal tooling and customer-facing AI features is cheap relative to the productivity and retention leverage. The arbitrage is in execution speed before this becomes table stakes.

Rules of the Game Are Not Changing. How You Play it Is.

That said how businesses works fundamentally doesn’t change. The playbook has always been the same three steps.

1. Find an arbitrage

2. Get profitable distribution

3. Build defensibility to protect it

A useful analogy: when the forward pass was introduced to American football, it changed how the game was played — but not what it takes to win.

You still needed to score more points than the other team.

The teams that adapted their tactics to the new rules thrived. The ones that didn't got left behind.

AI is the forward pass. The scoreboard is still the scoreboard.

The Short Term Goals: Acquisition, User Value, Monetization

On a week-to-week basis, everything that matters in a software company roughly maps to one of three buckets:

1. Acquisition - How do you find users a sustainable cost?

2. User Value - How do you build something they want so they stay around?

3. Monetization - How to you capture enough value to fuel the other 2 with profit left over.

Do all three well and you can build real enterprise value.

Screw up one of them and the other two won't save you.

AI will change how you execute on all three.

It will not change their importance, or how they depend on each other.

The Long Term Goals: Defensibility via the 7 Powers

My biggest pet peeve in business is use of the word “strategy” incorrectly. It drives me insane.

Strategy commonly used as a proxy term for "big goals” or "important things” or “fancy sounding things that leadership does". None of these are really strategy.

The best definition of “strategy” to me is how you’re going to protect the arbitrage that you have created.

There are a million bad books on strategy. Arguably the only real book on strategy is the 7 Powers Framework by Hamilton Helmer.

The core idea is that there are core 7 ways of protecting the arbitrage you have from getting competed away.

AI will impact some of these massively and some of them less so.

Arguably from 2010 to recently, quality software engineers were a “cornered resource”. Without them, you couldn’t build software, that just changed.

So What Do You Do With this Information?

There is a lot to cover here, so I am going to split this up into the

1. How does this change how you act in the short term to generate profit?

2. How does this change the long term to protect your profitability?

Until then, learn as much as you possibly about AI and how you can use it.