AI Startups have worse economics than SAAS Shops
Andreessen Horowitz’s Martin Casado and Matt Bornstein published an article of artificial intelligence (AI) startups. Artificial Intelligence businesses will resemble traditional software companies, the well-known venture firm is not so sure.
Fundamentals of Startup business category of venture-backed startup might sport materially less attractive economics than we expected captured our attention.
Software distribution model in SAAS which a third-party provider hosts applications and makes them available to customers over the Internet. In this one of three main categories of cloud computing, alongside infrastructure as a service (IaaS) and platform as a service (PaaS).
Artificial Intelligence focused companies have lesser gross margins than software companies due to cloud compute and human-input costs, endure issues stemming from edge-cases.
Artificial Intelligence drilling into the gross margin point, as it’s something inherently numerical that we can get other, informed market participants to weigh in on.
Software as a service (SAAS) companies should trade at a revenue multiple discount to SaaS companies, leaving the latter category of technology company still atop the valuation hierarchy.