Is Vertical AI the Future of Enterprise Software

Startups are transitioning from legacy SaaS to vertical AI applications targeting high-cost, repetitive language-based tasks across various sectors, according to Bessemer Venture Partners' latest State of the Cloud report. This shift isn't the end for enterprise software but signifies an evolution requiring adaptation to new AI capabilities. Bessemer partner Sameer Dholakia highlights the transformative potential of AI-enabled tools and large language models, particularly for early adopters. The trend towards vertical AI is growing, with firms like Greylock and Cowboy Ventures pinpointing promising startups, many of which have been securing funding since before ChatGPT's launch in late 2022. Enterprise software pricing models are changing, with companies charging based on work done rather than user numbers. However, many vertical AI startups are still far from exit, with a backlog of later-stage companies yet to go public due to market contraction and AI integration pressures. Dholakia predicts that public offerings will likely increase by next year as market conditions improve.

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