Generative A.I. is having its zeitgeist moment with investors, even if some in the tech industry are seeking to slow its innovations down. But according to one A.I.-focused VC, certain companies won’t be able to get away with just having one A.I. slide in their deck any longer. “I think pretty quickly, we're moving past, like, ‘A.I. for blah, blah, blah,’” Erin Price-Wright, a partner focused on early-stage investments at Index Ventures, recently told me.
She believes that, for enterprise SaaS (software-as-a-service) companies in particular, “Now, it's reimagining what SaaS products look like with A.I. at their core” versus having A.I. as “a selling point.”
Index Ventures has been investing in A.I. startups over the years and got in on the so-called foundation model company Cohere (in the same bucket as OpenAI) back in 2021. Price-Wright is among a rapidly-growing segment of VCs who believe that we’re at the beginning of a big platform shift with A.I., akin to the internet and mobile.
From her perspective, “going forward, it's going to be very difficult to raise any cash as at least a B2B or enterprise SaaS company if you don't have an A.I. strategy.” Her reasoning is that software companies now have a standard of doing things like outsourcing databases or having a cloud strategy—and that A.I. is quickly becoming a similar pillar for SaaS companies.
In other words, as she recently penned in a blog post, “within a decade, A.I. will be a core component of every piece of application software that’s built and shipped.” Price-Wright argues that every SaaS company in their portfolio is “developing a strategy around A.I.,” pointing to recent A.I. announcements from portfolio companies like Discord, Notion, Intercom, Beamery, and Figma.
In that sense, Price-Wright argues that “basically all software investing right now, at least on the B2B side, is A.I. investing.” Valuations, therefore, can vary greatly: She says there isn’t a rule of thumb of, "'Oh, you put A.I. in front of this, and suddenly you get a 10% bump.'"
Certainly, some companies are seeing a premium: namely, generative A.I. startups. Per PitchBook data, the median pre-money valuation for generative A.I. firms hit $90 million so far this year (based on nine deals PitchBook has tracked), up from $42.5 million in 2022.
Price-Wright believes the overall hype is justified. But for software startups hoping to snag a check from Index Ventures, the A.I. buzzword has “become a little bit less of like, a wow factor,” and more of, “this is the base case.”
Have a great weekend,
Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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