December by D’Ornano + Co: The GenAI Reality Check, Why Agentforce Signals Defense Not Offense, and the Agent Era
This is our monthly newsletter dedicated to Tech x Investments.
Dear readers,
As we embark on 2025, I want to extend my warmest wishes for the year ahead.
I'm particularly excited to share this edition of our newsletter at such a pivotal moment for technology and markets. The coming year marks a critical inflection point in the evolution of generative AI, as the technology transitions from novelty to transformative force. While 2024 was dominated by discussions of potential, 2025 will be defined by scalability and practical impact.
Several key developments will shape this transformation. Industry-specific AI solutions will take center stage, moving beyond generic models to address the nuanced needs of regulated and complex sectors. Autonomous agents will emerge as a powerful new paradigm, capable of executing multi-step workflows with minimal human intervention, though their impact may initially be limited by technological maturity. Edge AI will become crucial for real-time decision-making, particularly in autonomous vehicles and industrial automation.
Perhaps most critically, we'll see increased focus on the infrastructure and legal challenges posed by AI scaling – from energy consumption to computing power bottlenecks to copyright issues. The explosive growth in AI workloads is driving innovation in clean energy sources and specialized hardware, while companies adopt decentralized training methods to overcome resource constraints. Amid the copyright legal battles over training data, innovative alternative solutions are emerging. Even as foundation models maintain their strategic value through continuous innovation and customization, the path to AGI remains distant, keeping us firmly in the realm of specialized intelligence.
This technological evolution is already triggering fundamental disruptions across the enterprise software landscape, creating what I call the "GenAI Paradox."
Take Salesforce, emblematic of the first SaaS wave: while its stock has rebounded 28.62% on enthusiasm around its Agentforce launch, beneath this surface-level renaissance lies a more complex reality. The shift to usage-based pricing for AI features ($2 per conversation) threatens long-standing SaaS revenue predictability, while early data suggests AI feature integration typically could lead to a 10-percentage point drop in gross margins as these features scale for some SaaS companies.
This fundamental transformation extends beyond mere feature addition – it challenges the core premises that enabled SaaS companies to thrive in the first place. Microsoft CEO Satya Nadella's recent warning that "SaaS business applications could collapse in the Agent era" highlights the existential nature of this shift. Success in this new era demands what I call a "Durable Growth Moat" – the combination of strong fundamentals (best-in-class gross revenue retention for enterprise, sustained new customer growth, R&D investment exceeding 18-20% of revenue) and resilience factors that protect against competitive and technological disruptions. Our Advanced Growth Intelligence (AGI) framework, based on analysis of 600+ disruptive technology companies, shows that those scoring in the top quartile consistently achieve exceptional outcomes, joining for example the exclusive 10X Club in SaaS.
The convergence of GenAI maturation with improving macroeconomic visibility and a more stable political landscape is creating a unique window of opportunity in private markets for high-growth companies. After a period of valuation reset and operational focus, companies that have successfully navigated both the macro challenges and the GenAI transition are well-positioned for exits. Our data suggests these companies are attracting premium valuations by demonstrating not just strong fundamentals but also clear evidence of GenAI resilience. Several metrics have already emerged as critical: AI feature adoption rates exceeding industry benchmarks, documented productivity improvements from AI integration, and maintenance of strong margins despite AI-related costs. The coming year promises increased exit activity across the technology stack, from infrastructure players solving critical AI scaling challenges to vertical-specific SaaS providers leveraging deep domain expertise. Service Titan’s successful IPO, with its demonstrated ability to maintain high retention rates while expanding into adjacent markets, provides a blueprint for others. The winners in this next wave won't necessarily be the largest companies, but rather those that most effectively combine operational excellence with AI-driven transformation.
Since founding our firm now a decade ago, I've witnessed several technological transitions and discontinuity factors, but few have matched the current moment's combination of opportunity and complexity. As always, I remain committed to helping you navigate these waters, separating signal from noise, and identifying the companies truly positioned to thrive in this new era. The lessons from both my predictions and the SaaS transformation suggest that 2025 will reward those who can execute on the practical realities of AI integration while maintaining the operational discipline that has always characterized enduring businesses.
Have a good read,
Raphaëlle
GenAI Predictions for 2025: From Hype to Practical Impact
2025 will mark GenAI's transition from hype to practical impact, with several key developments shaping the landscape. Explore our analysis of what is expected in 2025 across the GenAI tech stack, from industry-specific solutions to infrastructure breakthroughs. Learn how Agents, Edge AI, and foundation models will shape the next wave of innovation, and why energy and compute constraints could determine winners and losers.
The SaaS Renaissance Illusion: Why AI-Driven Growth May Mask Fundamental Business Model Threats
Explore our analysis of the "GenAI Paradox" in SaaS, where apparent AI-driven growth may mask fundamental business model challenges. Using Salesforce's recent Agentforce announcement as a lens, we examine how the shift to GenAI-first architectures could reshape enterprise software economics. Our Advanced Growth Intelligence (AGI) framework reveals why traditional metrics may no longer tell the full story.
Satya Nadella | BG2 w/ Bill Gurley & Brad Gerstner | BG2
In a candid conversation that sent ripples through the enterprise software world, Microsoft CEO Satya Nadella warned that 'SaaS business applications could collapse in the Agent era.' His stark assessment challenges conventional wisdom about how AI will impact existing software platforms.
Google's December launch of Gemini 2.0 marks a strategic shift in the AI race, with the platform specifically architected for the emerging 'agentic era.' This second-generation release suggests that even the tech giants see autonomous agents, as the next frontier in enterprise software.
How Are Companies Using AI Agents? Here’s a Look at Five Early Users of the Bots | Wall Street Journal
Artificial intelligence (AI) agents are being widely adopted by companies to enhance operations without human help. The five implementations featured have shown promising results, highlighting the potential of AI agents to transform business operations significantly while also addressing the necessity for cautious supervision and strategic management of these autonomous systems.
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