00:00Nainad, what do you see in terms of companies not even just looking to add this technology, but maybe more
00:05consolidation more broadly in software?
00:07Yeah, so you may recall that we came out last year with a very bold statement that there will be
00:12mass consolidation in the mid-market software space.
00:16So think about all of the SaaS players that are providing productivity and automation tools.
00:23That market will be consolidated.
00:25And with the new tools that came out on February 5th, we will see a lot of disruption.
00:34Anurag, do you agree with that?
00:35Are we going to see a lot of disruption and consolidation among mid-level, mid-cap software names?
00:41I think probably the consolidation or the disruption would be more at the lower end than the mid or the
00:47large cap,
00:47just because some of these companies, when they are intertwined with some of these software packages into day-to-day
00:53operations,
00:55it's not that easy to take that off.
00:57So, you know, when we look at somebody like a Claude, I think they're going to make a bigger dent
01:01on the smaller size of businesses out there.
01:04I'd love to just get your thoughts on that, on the smaller versus mid-sized businesses.
01:07Yes, small and mid-caps.
01:09But think about once agents start performing tasks, the moats that a lot of these mid-market companies had,
01:18that they had customer captivity, high switching costs, will disappear.
01:22Because the humans being in enterprises will care, how do I manage those agents?
01:31And agents couldn't care less about all of the nice interfaces that they built over time, which build the customer
01:39captivity.
01:39You won't need those interfaces anymore.
01:42Songyi, I want to bring you into this because, of course, as running a VC fund, you see a lot
01:46of these smaller, earlier stage companies.
01:48Who do you think is a better place to tackle some of the disruption?
01:52Is it coming from the small end or is that where all the disruption is happening?
01:55And it's the mid-cap companies that maybe have more integrated customers and can weather the storm.
02:00So there is a kind of distinction between small, mid-cap software companies and non-software companies.
02:07And I think one of the exciting aspects of all this kind of launch of the agent software
02:14and ability to deploy this agent in many different disciplines is smaller companies,
02:21mom-and-pop operations, who were not able to benefit from the development of software and cloud
02:27and all those technology, is now in a position to integrate the kind of the power of software
02:33and provide more polished and data-based service to their captive audience and clients.
02:42So I think this is a kind of exciting moment because this development of AI and technology and agents
02:49will enable them to enable the small, medium-cap companies to incorporate the software
02:57with a quality that was only available to a handful of big tech companies.
03:02It's an exciting moment, but maybe a little bit less excited if you're either one of the private capital firms
03:07that's gotten crushed because of their software exposure or one of the companies themselves,
03:11which brings me to just the last point I would love for this investment committee to discuss.
03:15Anurag, valuations, they were getting pretty punchy, especially when private equity was jumping in in 2021, 2022.
03:22In your mind, have valuations for the sector as a whole reset enough?
03:26You know, they are reset enough.
03:28Now, the question is whether private equity is going to benefit or capitalize on it.
03:32And more importantly, the companies that have a decent amount of balance sheets right now,
03:36are they going to go out and buy back a lot of their own shares in order to show some
03:41confidence to the investors?
03:42How about you, Nainad? What do you think of valuations now?
03:45I think we will see a shift from subscription-based valuation models, which you could predict.
03:55And if you look at all of the agent models, there will be a lot of volatility,
03:59because if it's outcome-based, it will fluctuate over time.
04:03And that will drive even more craziness in the markets.
04:07Sonya, you only got 30 seconds left, but I would love to get the final thought from you on this.
04:11In my career, I have seen many fluctuations and adoption of new technology that led to price value,
04:16kind of valuation resetting.
04:19So I think it's one of those cycles, but I think we will see a lot of the new opportunities
04:23coming out of this as well.
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