#162: Practical Investor - What's Working Now in AI-Driven SaaS Growth - Dave Yuan

Sep 19, 2025

Dave Yuan, founder of Tidemark Capital and a growth equity expert in vertical SaaS, discusses the transformative power of AI in software. He reveals that AI is no longer experimental but integral to operations, highlighting how companies like Toast and ServiceTitan leverage it for measurable ROI. Dave explains the significance of 'control points' and how hero users can catalyze AI adoption against incumbents. He also emphasizes the shift towards outcome-based pricing, allowing firms to capture significant value, and shares insights on navigating AI's impact in various sectors.

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INSIGHT

Control Points Hold AI Advantage

Control points combine workflow, data, and account gravity to earn the right to sell adjacent products.
Vertical SaaS control points are better positioned to build AI extensions than standalone content or point solutions.

INSIGHT

Hero Users Create Rapid Wedges

Native AI point solutions target 'hero users' who can buy and adopt tools quickly and then drive integration.
These hero-user tools can become wedges that push into incumbent control points over time.

INSIGHT

Automate The 'Cousin Richie' Work

'Cousin Richie' tasks are high-impact, low-attention operational jobs ripe for agentic AI automation.
Replacing these outsourced or neglected tasks with agents creates clear ROI and market opportunities.

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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."

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