One aspect that changes the game, is the ability to scale.
Before, you can wait a SaaS company with 0% margin(finding PMF) for the first 2,3 years, because when they found it, the scale can quickly made up for the first 2, 3 years. And service company will continue at a "constant" margin and unable to scale.
Now, service company can scale. It can enjoy higher margin on day 1 while finding PMF(and that's quicker compare to SaaS too). Service-oriented company can also aggressively increase margin, because of the cost of implementation went to "zero" thanks to AI.
You nailed it: "The old venture capital adage of “don’t do services” is maybe from a bygone time, where the gap between software and consulting businesses was significantly larger, like 10-15x, than it is currently, like 4-5x. For the best performing hybrid software / services companies like Palantir for example the multiple is almost the same or even better than any other software business. With the advancements of AI, the convergence between software and services will likely speed up even more."
One aspect that changes the game, is the ability to scale.
Before, you can wait a SaaS company with 0% margin(finding PMF) for the first 2,3 years, because when they found it, the scale can quickly made up for the first 2, 3 years. And service company will continue at a "constant" margin and unable to scale.
Now, service company can scale. It can enjoy higher margin on day 1 while finding PMF(and that's quicker compare to SaaS too). Service-oriented company can also aggressively increase margin, because of the cost of implementation went to "zero" thanks to AI.
You nailed it: "The old venture capital adage of “don’t do services” is maybe from a bygone time, where the gap between software and consulting businesses was significantly larger, like 10-15x, than it is currently, like 4-5x. For the best performing hybrid software / services companies like Palantir for example the multiple is almost the same or even better than any other software business. With the advancements of AI, the convergence between software and services will likely speed up even more."