Are AI Fears Crushing SaaS Valuations?

It depends on what you’re selling.

Add-on apps are taking more heat

If you’re selling an add-on app on Shopify, WordPress, or Zendesk, buyers are more cautious right now.

Part of that is platform risk. Part of it is AI.

Single-purpose apps are easier to replicate than they were a few years ago. Buyers know this. So they either pass or come in low (think 1.5-2.5x SDE).

Standalone SaaS is holding up better

For standalone SaaS, I haven’t seen valuations collapse.

What I do see is a lower ceiling.

If growth is slowing, churn is creeping up, or the product feels easy to reproduce with AI, buyers will use that against you in diligence.

When buyers think about AI risk, they’re usually asking three things:

• How hard are you to replace in the customer’s workflow?
• How many customers would be materially disrupted if you disappeared?
• How durable is your differentiation if AI lowers the cost to build?

That is a much better lens than just asking whether the business has “AI risk.”

What still moves the multiple

The biggest drivers are still growth, retention, size, and deal structure.

Profitability matters too. But for a lot of software businesses, growth quality and retention matter more.

Also, don’t get too attached to headline multiples.

Multiples are a vanity metric if you don’t understand the structure behind them.

I saw a recent deal with a strong headline valuation, but a meaningful portion was equity and earnout. The cash at close was much more grounded. That’s becoming more common.

One more thing on valuation language. Buyers will usually normalize around SDE and make their own adjustments. So if a broker quotes you an EBITDA multiple, make sure you understand exactly what add-backs are doing the work.

What sellers should do

If you’re preparing to sell, ask yourself:

• What happens if a competitor rebuilds part of this with AI?
• Why do customers stay anyway?
• How dependent is the business on me?
• How much of the growth story is real versus hoped for?

AI hasn’t crushed SaaS valuations.

But it has made buyers more skeptical.

The businesses still getting premium attention are the ones with a clear answer for why they keep winning even if AI lowers the cost to build.