You know what AI transformation means for a company?

It's like going from a horse-drawn carriage to a Tesla.

You get there faster, but now you have to learn how to use all those buttons.

What AI Transformation Means for A Company

• Why Read:

  • Read this article to grasp the transformative potential of AI, which extends far beyond single tools or use cases. By adopting a comprehensive AI strategy and embracing early adoption, founders can ensure their companies stay ahead of the curve and fully leverage AI's capabilities.

• Featuring:

  • Viesturs Abelis, Writer at Truesix

• Link: 

  • “AI transformation: Here’s what it actually means for a company”

• Key Concepts and Tactics:

• Recognizing AI's Transformative Potential:

  • Point: AI is not a single tool or passing fad, but a transformative technology with broad capabilities that can digitize and automate processes, analyze massive data, and complete tasks efficiently.

  • "Equating AI to any single tool or use case is myopic. For any company, recognising AI's transformative potential is the first step to embracing it and kicking off a new way of working."

  • "In the last 18 months, everyone has realised that what we believed about AI until then is nothing compared to what we should expect."

• Adopting a Comprehensive AI Strategy:

  • Point: Companies must take a holistic approach, systematically examining how AI can create value across their entire organization, from products and services to internal operations.

  • "Companies must take a holistic approach, systematically examining how AI can create value across their entire organisation — from products and services to internal operations. Without this comprehensive lens, implementing AI risks becomes an uncoordinated effort where the immense potential is squandered on disjointed use cases."

• Enabling AI Evangelists:

  • Point: Companies should have dedicated individuals or leaders with the mandate to explore, test, and recommend AI tools to drive the discovery of new use cases and ensure teams make the best use of existing ones.

  • "Therefore, to drive the discovery of new tools and use cases, as well as ensure teams make the best use of existing ones, there must be leaders with the mandate to explore, test, and recommend AI tools."

  • "We have certain AI evangelists within the organisation that invest more time into AI than others and they use this information to smarten up the team in their direct circle."

• Being Early Adopters:

  • Point: Despite the rapid evolution of AI tools, companies should adopt what's available, learn from it, and be prepared to adapt as the technology advances, as early adopters will have a clear advantage.

  • "If you wait for the perfect tool, you'll wait a long time. Use what's available, benefit as much as possible, learn what you can, and don't be demotivated when you have to throw it away. The last 12 months have been crazy in terms of what's possible and what's not. A lot more is going to change".

• Transforming the Workforce:

  • Point: Companies must ensure their workforce is open to continuous upskilling and views AI as an augmenter rather than a competitor, as AI fluency is becoming a core requirement in the business world.

  • "Arguably the biggest determinant of successful AI transformation is having a workforce that has bought into continuous upskilling. This can be particularly challenging, as, given the popular media narrative of 'AI is coming for your job,' it's common for workers to view AI as a competitor, rather than an augmenter."

  • "We see our responsibility in helping our employees to ensure they have a career to look forward to. AI won't be gone in a year, or two. It's here to stay. Not learning AI is like not learning English in the business world — it just no longer makes sense."

SaaS Exits at Scale

Why Read: 

• Read this article to learn about the various factors influencing acquisitions, such as team, technology, and market acceleration, in addition to revenue metrics. Understanding these criteria can help founders better position their companies for acquisition by BigCos and Private Equity firms.

Featuring:

• Jason M. Lemkin (@jasonlk), Trusted Advisor at SaaStr

Link:

• “Dear SaaStr: What’s The Average Size at Which a SaaS Company Will Typically Get Acquired?”

Key Concepts and Tactics:

• Acquisitions Can Happen for Various Reasons:

  • Point: Startups can be acquired for reasons other than their exact MRR/ARR, such as team, technology, or acceleration of time-to-market.

  • "Startups can be acquired for a lot of reasons that have little to do with the exact MRR/ARR — team, technology, acceleration of time-to-market. If a BigCo decides that buy makes more sense than build, and there is a lot of urgency … then sometimes they'll buy something will relatively little revenue."

• Minimum ARR for Acquisition with Scale:

  • Point: For acquisitions aimed at building real revenue upon the acquired company, most Big Cos and Private Equity firms prefer companies with at least $8m-$10m in ARR and reasonable capital efficiency.

  • "If an acquisition is to acquire something with scale to build real revenue upon, most Big Cos (and not coincidentally, most Private Equity firms) aren't too interested until you are past $8m-$10m in ARR, and ideally, reasonably capital efficient."

• Increased Acquisition Threshold for PE Firms:

  • Point: Many PE firms have raised their acquisition threshold to around $20m ARR and efficiency, as they believe this scale allows them to confidently use their resources and playbooks to grow the business to $200m ARR over time.

  • "And these days, for many PE firms (Thoma Bravo, Vista, etc.) the bar is more like $20m ARR and efficiency. That's the scale at which they feel they can confidently use their resources and playbooks to get to $200m ARR over time."

• Big Tech Companies' Acquisition Criteria:

  • Point: Big Tech Companies generally consider acquiring SaaS businesses once they reach around $10m ARR, as they see this as a proven framework to build a $100m+ ARR business upon.

  • "The bar is probably more like $10m for a Big Tech Co to buy you. If you've gotten that far, you're a leader (if not the leader) and they generally think there is enough of a framework to build a $100m, $1B+ ARR business on top of."

• Market Forces Can Influence Acquisition Decisions:

  • Point: While most BigCos consider companies below $8m-$10m ARR as unproven, market forces can sometimes push them to acquire smaller companies.

  • "Most BigCos won't see anything much below $8m-$10m in ARR as 'proven' or having yet broken out in the market. So usually, they'll wait … and see. Unless market forces force them to do otherwise."

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