The Prophet recently penned a long LinkedIn post on The New Diligence Questions for SaaS in an “AI”-dominated world that, on a first read, makes it sound like diligence is going to get insanely difficult unless you’re backing AI (because, apparently, AI is going to replace everything and everyone).

The reality is that AI doesn’t really complicate the equation, especially if you already realized that a lot of software is becoming a commodity and making the right investment is all about focussing on what’s not commodity and then, when you find that subset of potential investments, which one of those is the most user friendly. And you can narrow down to a good potential investment pretty quick with just 3 short questions:

What data is being captured, created, or curated?

Tech replicates quickly, and easier to build now than ever. But good data is scarcer and scarcer.

What unique algorithmic capabilities does the platform possess that can’t be accomplished by today’s, and likely tomorrow’s, AI?

Orchestration, workflow, NLP, et.? Sorry but that’s all pretty common place. We’ve had we-based middleware since a year after the world wide web was invented (and orchestration is just middleware 3.0), workflow for decades longer, NLP for decades (although LLMs now make it easier to use and more accessible), etc. You need to look for unique algorithmic capability that can’t be plug and play from open source components or learned by dumb AI (like advanced optimization, new types of mathematically sound predictive analytics algorithms, etc.)

Does the platform enable users, through Augmented Intelligence capabilities, to be 10X as productive as they would be without it?

i.e. where data collection, processing, workflow, etc. etc. etc. can be fully automated, is it? does it employ NLP interfaces to the extent possible for non-technical users?

This is what defines winning software, not plugging in overhyped 3^rd party LLMs and AI tech that is still, more-or-less, experimental, hallucinatory, and fundamentally flawed.

Once you have successfully answered these questions, chances are that there is nothing else super significant to answer about the tech (beyond the standard due diligence process, inc. security and privacy reviews where needed) and you can focus on the business and market questions. Does the market exist, and does the business have the right people, processes, and support to capture the market.

So, in other words, if the platform

• greatly increases productivity,
• does something AI can’t do, and
• captures, curates, or creates data — the most valuable commodity

The SaaS play has value, and you can move onto the business and market analysis.

The only real question will be how to define the market and the new market value in an age of (temporarily) overhyped AI / Agentic plays (when, as we have pointed out many times, it’s not new, just better) to determine its real valuation (when you are being flooded with nonsense).

And of course,

• beyond pure S2P,
• easy agentic co-worker interfaces, and
• plays well with “AI”,

as pointed out by The Prophet, will increase value, but that’s not the core of what you’re looking for.