A frightening SaaS selloff reshapes the outlook for startups and private markets: “Code by itself was never a true competitive barrier”

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On this Friday the 13th, finding a frightening tale for you was not difficult.

It began just over a week ago. Conditions in the public and private markets for 2026 appeared entirely normal. Conversations centered on the strange, AI-ancient social network Moltbook. Then, new developments in enterprise AI agents such as Claude emerged, and everything still seemed fairly routine (models are, after all, constantly updated and enhanced).

However, public market investors began to process this, casting doubt on the foundational assumptions of the vast software-as-a-service (SaaS) sector. Concerns have been simmering for some time, including questionable practices around applying SaaS metrics to AI-native companies (a logic that is dubious at best).

Then, a persistent selloff took shape: As of yesterday’s market close, over the past five trading days, is down over 3%; is down 3%; Docusign has fallen 5.5%; and Workday is down more than 10%. (These figures include a partial rebound from their lowest points.) These firms are among the most severely affected in what is now being called the “SaaSpocalypse.” For those wondering about the implications for startups and private markets, the answer is straightforward. It highlights a widely known truth: despite a year of hushed discussions, the industry still lacks a genuine strategy for monetizing enterprise AI. The old certainties of the SaaS period have disappeared as abruptly as Jason (appears to) at the conclusion of the original Friday the 13th film.

“The software downturn demonstrates that code by itself was never a true competitive barrier,” stated Zach Lloyd, CEO and founder of AI agent startup Warp, in an email. “For venture capitalists and founders, this alters the entire equation: you can no longer rely on execution as a bet when software development costs are approaching zero. The critical question now is ‘what prevents someone from replicating this next week,’ and if your sole response is ‘we have talented engineers,’ you are facing serious challenges.”

This reaction is probably somewhat exaggerated, but the core issue persists, noted Capital’s Daniel Docter.

“The peaks are never quite as high as they seem, and the troughs are never quite as deep,” Docter told . “I believe the near-term market response is likely a bit overdone. But the more crucial, long-term question is this: will AI replace a substantial share of SaaS software or SaaS revenue?

That puts hundreds of billions, potentially trillions, of dollars in value at stake. And what is more unsettling than uncertainty?

We are off for the long weekend! See you on Tuesday,

Allie Garfinkle
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