The B2B market in 2025/2026 is experiencing a paradox that every founder, CEO, and investor needs to understand: there’s more capital, more budget, and more opportunity than ever before.
But the thing is .. that incremental B2B budget it’s not evenly distributed. Not even close.
If you’re not grabbing AI budget, you’re swimming against a brutal current. Let’s break down exactly what’s happening and what you need to do about it.
The VC Paradox Today: Capital and Growth Are Back — But Only for the Select Few
Here’s what’s actually happening in the market right now:
Venture Capital is back to 2021 levels – but 50% of that capital is going into just 4 deals. We’re seeing massive concentration at the top.
Software spend is up a record percentage – but half of that increase is going to price increases from existing vendors, and 30%+ is specifically allocated to AI. The rest? Flat or shrinking.
Unicorns are being minted at a 3-year record pace – but they’re far more concentrated than in 2021. The winners are winning bigger, and there are fewer of them.
IPOs are back – sort of. We’ve seen some strong companies go public, but the year is ending with a whimper. Day-1 pops don’t equal sustainable returns. If you bought at the peak in 2025, you’re down an average of 44% across major software IPOs like Figma (-74%), Circle (-73%), CoreWeave (-58%), Klarna (-38%), Omada (-31%), Chime (-30%), Hinge Health (-27%), and eToro (-21%).
Speed to $100M ARR is faster than ever – but mostly (though not exclusively) for new AI-native startups. Companies like Palantir, Gamma, Vercel, and Replit are the exceptions that prove the rule: older companies can win, but you need to be aggressively building in AI.
The bottom line: If you aren’t a hot AI startup, or a leader with a high-ROI AI offering, you are hitting headwinds. Your job is to find the tailwinds.
The Venture Capital Reality: Tons More Capital, But Not Tons More Deals
The data here is stark. In October 2025 alone, $44.5B was added in new unicorn valuations – the highest monthly valuation for new unicorns in 3+ years. Through 2025, $136B has been raised by companies reaching unicorn status.
But look at the unicorn creation chart by month. After the crash in 2022-2023, we’re seeing surges in funding in late 2024 and 2025. But the purple bars at the end of the chart tell the story: venture funding is concentrating into fewer, larger rounds.
And here’s the kicker: venture funding is driving to an all-time high, with total EU/IL/US venture capital in cloud & AI hitting $184B in 2025E. Of that, AI model funding alone represents $15B, with another $19B going to Anthropic specifically. Model funding as a percentage of total is now at 59.6% for 2025.
This isn’t your 2021 venture market. This is winner-take-most on steroids.
New Unicorns Are Young, So VCs Are Focused on The New
65%+ of recent unicorns are 0-3 years old. US companies are averaging just 2.4 years from founding to unicorn status, versus 4.1 years for EU/IL winners.
Look at the distribution:
- Under 2 years old: 48 companies
- 2-3 years old: 85 companies
- 4-6 years old: 33 companies
- 6-7 years old: 16 companies
- 8-9 years old: 11 companies
- 10+ years old: 7 companies
The example that drives this home: Lovable went from co-working space to $6.3B valuation, hitting $100M ARR profitably with a team of just 50 people. That’s $2M ARR per employee.
VCs are hunting for the next Lovable, not the next incremental improvement to your 10-year-old SaaS platform.
B2B Spend is Accelerating… But Read the Fine Print
Gartner forecasts worldwide IT spending to grow 9.8% in 2026, exceeding $6 trillion for the first time. Software specifically is projected to grow from $1.244T in 2025 to $1.433T in 2026 – a stunning 15.2% year-over-year growth rate.
That sounds great! Until you realize what’s actually happening with that money.
According to multiple sources:
- ISG: 30% of IT budget increases are going into AI
- Deloitte: 36% of IT budget increases are going into AI
- McKinsey: 20% of all digital IT budget is now allocated to AI
- BCG: AI is the #1 priority, with funding being reallocated from “mature categories”
- Gartner: AI is the top 1-2 priority across CIOs, but average budgets are only up 2.79% for 2026, AND Gartner is forecasting 9% price increases from existing vendors
With average budgets up 2.79% and price increases of 9%, companies are underwater before they even think about new purchases. They have to steal budget from somewhere to fund AI initiatives.
So steal… or be stolen from. It’s up to you.
The Growth Premium is Bigger Than Ever
Want to see the most important chart in SaaS right now? Look at the SaaStr.ai Live Market Multiples Index, which tracks 25 leading B2B/SaaS companies grouped by growth rate.
High Growth Leaders (30%+ ARR growth):
- Average Multiple: 23.0x ARR
- Average Growth: 43%
- Average Market Cap: $94B
- Companies: RBRK, PLTR, FIG…
Moderate Growth (20-30% ARR):
- Average Multiple: 11.7x ARR
- Average Growth: 24%
- Average Market Cap: $56B
- Companies: MDB, DDOG, CRWD…
Slower Growth (<20% ARR):
- Average Multiple: 4.9x ARR
- Average Growth: 9%
- Average Market Cap: $47B
- Companies: WDAY, TWLO, PATH…
That’s a 4.7x difference in valuation multiple between high growth and slow growth companies. In a market where public cloud companies’ growth rates continue to be under pressure (dropping from 47% in Q1 2021 to 15% in Q3 2025), maintaining growth is everything.
Even the mega-caps are feeling it. Look at Microsoft: through July 2025, the company had ~15,300 layoffs but revenue grew from ~$140B in 2019 to $280B in 2025. Their headcount vs. revenue chart shows revenue growing exponentially while headcount has actually decreased from its 2024 peak.
Growth Comes From TAM Expansion, Not Feature Parity
The real winners in AI aren’t just adding “AI features.” They’re fundamentally expanding their TAM through dramatically higher ACVs.
Look at these comparisons:
- Gamma at $100/seat vs. Google Slides (free) or Canva (free-ish)
- Cursor at $400-$5,000/seat vs. Jira at $5/seat
- AI SDR at $50k-$100k/year vs. 1 seat of CRM at $1,200/year
This rapid growth is being driven by rapid expansion in TAM from AI versus previous SaaS TAM. Companies that are replacing humans, dramatically augmenting humans, or enabling what was previously impossible are capturing budgets 10x-100x larger than traditional SaaS seats.
This is the #1 way the game has changed (other than functionality). Ask yourself: are you expanding TAM, or just charging a bit more for your “copilot”? Because just charging for your copilot doesn’t count.
AI Hypergrowth Means Everyone is In Market at the Same Time
Here’s why AI-native companies are scaling so fast: unprecedented market timing. Every enterprise is making similar decisions simultaneously:
- “I need an AI GTM tool” → Clay, Qualified, Artisan
- “I need AI support” → Decagon, Sierra, Dialpad, Talkdesk, etc.
- “I need AI legal review” → Harvey, Legora, etc.
- “I need AI coding” → Cursor, Replit, et al.
- “I need AI security tool” → Rubrik, Wiz, etc.
This isn’t tire-kicking. Companies need these solutions now. Either because of genuine need, or because they need to bring AI innovation to their enterprise, or both. When was the last time you saw every potential customer in your category simultaneously hit the market with real budget?
It’s creating a once-in-a-decade (once-in-a-career?) compression of sales cycles and deal velocity. But the window won’t stay open forever.
The Brutal Truth: AI Features Alone Don’t Count
Let me be very direct here: you need to tap into the AI budget, not just make your existing product better with AI features.
The real AI budget is going to three categories:
- Replace humans (AI Contact Center, AI SDR)
- Augment humans dramatically (Cursor, Harvey, Claude + ChatGPT)
- Highly productive tools that make possible what was impossible before (Replit, Gamma, AI video tools)
Most classic SaaS leaders are not going this far with their AI offerings. They’re just making their products… better. Great. But that’s table stakes now. And it’s extremely hard to monetize because customers expect AI features as part of the base product.
If your AI strategy is “we added a copilot,” you’re not accessing the AI budget. You’re fighting for scraps from the traditional software budget, which is flat-to-down after price increases.
Leaner Teams Are Very Real (Yes, That Means Fewer Humans)
The efficiency gains from AI are showing up in real numbers:
Looking at ARR ($M) / FTE across companies:
- Cursor: 6.1x
- Lovable: 3.4x
- OpenAI: 1.5x
- Anthropic: 1.2x
- Atlassian: 0.46x
- Datadog: 0.51x
- ServiceNow: 0.49x
- Gitlab: 0.54x
The newer, AI-native companies are operating at 6x-12x the efficiency of traditional SaaS companies. And this advantage compounds over time.
According to Iconiq Capital, AI-native companies show superior burn efficiency driven by faster compounding of ARR. The burn multiple (FCF / Net New ARR) for AI-native companies in the $100M+ ARR range is 0.8x, compared to 1.6x for AI-enabled companies and 2.0x for median/non-AI companies in that same revenue band.
For companies under $100M ARR, AI-native companies are burning 0.4x their net new ARR, while AI-enabled burns 1.8x and median burns 2.0x.
Mature leaders drive this home:
- HubSpot: $1.29B revenue in 2021 with 5,895 employees → $2.63B in 2025 with 8,246 employees = +104% revenue on +40% headcount = 2.6x efficiency ratio
- Salesforce: $21.3B revenue in 2021 with 56,600 employees → $37.9B in 2025 with 76,453 employees = +78% revenue on +35% headcount = 2.2x efficiency ratio
Even Microsoft, with its layoffs through July 2025 totaling ~15,300 people, saw revenue grow from ~$140B in 2019 to $280B in 2025 while headcount actually decreased from its 2024 peak of 240K employees to 220K in 2025.
There Isn’t Infinite Time. But There is Still Time.
Here’s the good news: you’re not too late. Clio (founded 2008) and Gamma (founded 2020) just raised at $7.5B combined. Both are teaching important lessons about what you need to know about AI that traditional SaaS founders don’t naturally understand.
Grant Lee from Gamma announced their Series B at a $2.1B valuation on November 10, 2025, reaching $100M ARR profitably with a team of just 50 people. That’s $2M ARR per employee. PowerPoint was invented before the first website existed, but Gamma is winning anyway.
The lesson: AI enables you to compete in markets that seemed settled. But you need to be building something that’s 10x better, not 10% better.
Your Action Plan: How to Find Your Tailwinds
Based on everything we’ve covered, here’s what you need to do:
1. Be Brtual Honest About Your AI Positioning. Are you accessing the AI budget, or just improving your existing product? If you can’t articulate how you replace humans, dramatically augment humans, or enable the impossible, you’re not in the AI game yet.
2. Find Your TAM Expansion. What’s your ACV with your AI offering versus your legacy offering? If it’s not at least 3x-5x higher, you’re not expanding TAM – you’re just adding features. Go back to the drawing board.
3. Measure Your Efficiency Ratio. Calculate your ARR per FTE. If you’re under 0.5x, you’re in traditional SaaS territory. If you’re over 1.5x, you’re in the game. Target 3.0x+ to be truly competitive with AI-native startups.
4. Accelerate Your Timeline. The window for “everyone in market at the same time” won’t last forever. If you’re not moving with urgency right now – shipping, iterating, learning, shipping again – you’re falling behind competitors who are.
5. Make Peace With Displacement. If your AI offering isn’t cannibalizing something (including potentially headcount), it’s probably not compelling enough. The companies winning right now are comfortable with displacement because they know someone else will do it if they don’t.
The Growth is There. If You Can Seize It.
The growth is there. The money is there. This genuinely is the best of times for B2B SaaS.
Just only for the AI beneficiaries.
Be one.
The market has split into two very different worlds. In one world, companies are riding incredible tailwinds – raising at premium valuations, growing at unprecedented rates with lean teams, and accessing budgets 10x larger than traditional SaaS. In the other world, companies are fighting for scraps, dealing with flat-to-negative budgets after price increases, and watching their valuations compress.
Which world you’re in is largely up to you. The technology is available. The budgets are available. The customers are in market right now.
The question is whether you’re building something that deserves to win.
Carpe diem.
