AI margins, service components, and runway

Dave Yuan is the founder of Tidemark, an active growth equity investor focusing on vertical SaaS companies with outsized advantages that can become "control points" in their markets and grow very big. Dave and Tidemark have invested in successful vertical software companies like Toast, ServiceTitan, Jane, and CCC.

Tidemark hosts its annual VSaaS Collective Live Event, featuring experienced speakers for hundreds of vertical SaaS founders, on November 5, 2025.

In this episode, we discuss the practical opportunities and risks of AI as it is currently developing in 2025 for vertical SaaS companies. Dave explains several powerful examples of how AI is being used in his portfolio companies and the new strategic questions that are being discussed.

Dave also shares:

• Why software companies are getting real results with AI and are not waiting for the AI revolution--it's here now.
• How AI-powered "systems of action" have undue influence with important users and can potentially displace entrenched systems of record software.
• How fast-growing practical software company grow efficiently with well-timed product, channel, and regional expansion.

Quote from Dave Yuan, founder of Tidemark Capital

"There are a handful of examples where software companies with AI-powered solutions are getting two to five times what they got on a software seat with new outcome-based pricing. They are providing real hard to ROI that's measurable, oftentimes associated with revenue.

"And arguably, they're only getting started because the outcomes that they're measuring are relatively low value and they can increase the value of the outcomes and price accordingly.

"To capture that value, it depends on competition. Because you can add a lot of value to your customers, but you can only charge for that value unless there's not a lot of competition vying for the same thing."

Links

• Dave Yuan on LinkedIn
• Tidemark on LinkedIn
• Tidemark website
• VSaaS Collective Live event

This podcast is sponsored by Designli, a digital product studio that helps entrepreneurs and startups turn their software ideas into reality. From strategy and design to full-scale development, Designli guides you through every step of building custom web and mobile apps. Learn more at designli.co/practical.

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