Shomik Ghosh’s Post

IT'S TIME TO GET LONG ENTERPRISE SOFTWARE AGAIN The backdrop for B2B tech has never been more attractive than it is now We are coming of of a tech recession that lasted about 3 years Across the board B2B companies are running more capital efficiently, scrutinizing spend more carefully, and watching the dials on growth and spend Customer budgets are starting to loosen up especially as the "soft landing" is occurring and the Fed has started to decrease rates to a steady state in some sort of range (3-3.5%?) AI is delivering ROI contrary to media reports Every B2B company is incorporating AI not just AI native companies and it's improving end user experiences, time to value, shipping time, debugging time Companies need digital transformation more than ever Look at $WMT beating other retailers and even $AMZN by investing in e-commerce, inventory management, and robotics to improve efficiency, discovery, and recommendations $JPM is massively outperforming other banks and spends the most on tech than anyone else as it helps them deliver enriched customer experiences Both infra/security and SaaS will benefit in this environment however SaaS is a bit more beaten down in public markets so they will see a bigger uplift as "death from AI" gets absorbed and budgets start to normalize from customer optimizations Infra/Security are already at high multiples and those should maintain because of the mission criticality of the products but multiple expansion may be hard to come by unless a clear AI story (see $PLTR although $IOT proves this is not necessarily the case if can show fast growth and TAM expansion) B2B companies are FCF machines at steady state (even including SBC) but they have massive growth if they can leverage existing customer trust to expand into adjacencies and build out a distribution moat and prudent investment in this growth allows B2B companies to compound over high growth rates for many years that other industries can not manage So it's time for optimism A lot of medicine has been taken (although for AI native companies one could argue it'll have to be taken again) and companies are stronger, leaner, more customer oriented than before We've burned off many of the excess multiples in the space (except for the highest growth ones) and are set up for a goldilocks zone of 1) increasing customer budgets 2) decreasing interest rates 3) urgent need for digital transformation to respond to competitors and fast moving geopolitical supply shocks 4) decreasing regulation 5) lean teams shipping fast & customer oriented For those who wrote off this sector, it’s time to get 🔥 up about B2B!!