Dear SaaStr: How Much of a Threat is AI to Traditional B2B Startups Today?
AI isn’t yet slowing down the big leaders in SaaS, from Salesforce to HubSpot to Workday. In fact, they are embracing it.
Workday is seeing a 30% attach rate for its new AI products in new deals already:
And AI is the core focus of Salesforce today:
And HubSpot has just launched a suite of AI features that look pretty darn impressive. And are … bundled in.
In most cases, AI won’t outright “kill” SaaS B2B startups now or even soon. There’s zero evidence of that … at the moment at least 😉
But … it’s already making life a lot harder for those that don’t adapt.
Here’s why AI is at least a partial threat to many B2B start-ups today, even if you aren’t 100% feeling it yet:
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AI is Table Stakes Now in Many Categories, And Soon Maybe In Every Category: AI is no longer a differentiator, it’s the baseline. If your product doesn’t have AI capabilities baked in—whether it’s automating workflows, improving onboarding, or delivering predictive insights—it’s going to feel outdated fast. Customers expect AI to be part of the package, and mediocre AI won’t cut it anymore. If you’re not at least keeping pace with competitors on AI, you’ll lose deals. It’s that simple. Everyone from Marc Benioff to your direct competitors are making big claims for AI. And have an AI offering they are pushing — hard.
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Explosion of Competition: AI has lowered the barriers to entry for new startups. With OpenAI, Anthropic, Loveable, Replit, Cursor, Windsurf and many others, it’s easier than ever to build AI-driven products. This has led to an explosion of new competitors in almost every B2B category. If you’re not innovating fast enough or delivering a truly differentiated product, you’ll get drowned out by the sheer volume of new entrants.
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Customer Expectations Are Skyrocketing: AI has raised the bar for what customers expect from software. They want everything to be faster, smarter, and more automated. Onboarding should feel seamless, insights should be delivered without lifting a finger, and workflows should practically run themselves. If your product isn’t materially better through AI than it was even 12 months ago, you’re going to struggle to retain customers, let alone win new ones. Customers are expected AI magic now. You have to deliver.
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Pricing Pressure: AI is driving down the cost of certain types of software, especially those that rely heavily on manual processes or human intervention. If your product doesn’t leverage AI to deliver more value at a lower cost, you’ll find it hard to justify your pricing. Customers will gravitate toward AI-driven alternatives that are faster, cheaper, and more efficient. They are seeking them out, in fact.
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Feature Parity Matters More Than Ever: If your competitors are integrating AI into their products and you’re not, you’ll lose deals—even if their AI isn’t perfect. Customers don’t want to feel like they’re missing out on the latest. You don’t have to build the best AI solution overnight, but you need to at least match the competition to stay in the game.
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AI is Fueling Creativity and Innovation: The best engineers and product teams are obsessed with AI right now. They’re experimenting with everything new in AI, building new features rapidly, and finding ways to make their products smarter and more valuable. If your team isn’t doing the same, you’re going to fall behind. AI is forcing every B2B company to level up, and those that don’t will get left behind.
AI isn’t going to kill existing B2B startups outright, but it’s going to separate the winners from the losers much faster than before.
Have you stepped up?
The startups that embrace AI, innovate aggressively, and deliver real value to customers will thrive. Those that don’t will struggle to compete in an increasingly crowded and fast-moving market.
The pace of change, and the pace of software development, has never been faster in SaaS and B2B.
