The 5 stages of SaaS Death

Summary

Last week, I met a founder who’d just lost a pretty big $2M deal to a 3-person startup with a half-finished product (I call these “3 Stanford grads in a trenchcoat”). He was annoyed they didn’t even have a basic dashboard or settings page. I think he wasn’t angry about losing the deal, but mostly because he worked on the wrong thing. I think most of us in product have been there, realizing we put engineering teams through the ringer for something that someone else did in a weekend. The pattern I can’t unsee As part of the work I do at Paid, I’ve spoken to maybe 20 SaaS founders about AI, and lots of agent builders. Obviously these are VERY different companies, in different stages, and sometimes different industries. With SaaS – it’s like watching everyone go through the same cycle, but for business models. Let me show you what I mean. Every SaaS executive I know is somewhere on this curve today, with the variable being how quickly they’re going through it. Stage 1: Denial “Our customers need human oversight” This is where it starts. Usually in a board meeting. Someone asks about AI strategy, and you hear yourself saying things like: “Our customers value the human touch” “AI can’t handle our level of complexity” “We’re monitoring the space” “It’s mostly hype” Three months ago, I was advising a company that runs sales-training software. Solid business, $10M ARR, growing 35% annually. The CEO told me their moat was “design expertise that AI couldn’t replicate.” Last week, their biggest customer started building their own training content with Claude Opus 4.1 with projects… They didn’t need design expertise for that… Here’s how you know you’re in denial: You use terms like “AI washing”, you think ChatGPT is just a toy and everything built on top of it is “just a wrapper”. You also believe your industry is somehow special, somehow immune. You’re waiting for the hype to die down. While you’re in denial, your customers aren’t. I got some data from a couple of SaaS companie...