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The Future of AI? Follow the Money
Follow the money, they say, and the money says vertical AI agents are the future.
In fact, vertical AI agents could turn out to be 10 times bigger than disrupted Software-as-a-Service (SaaS) offerings, according to execs at Y Combinator, famous for funding tech startups.
The company provides early-stage startups with funding, mentorship and resources to help develop their products, grow their user base and prepare for future funding rounds. It has worked with companies including Airbnb, Dropbox, Stripe and Reddit and is known for its Hacker News site.
So execs at the company are a good bellwether of where things are heading, and things are heading toward vertical agents in the AI space, where a lot of funding action is taking place.
"I am fired up about this because I think people especially, startup founders, especially young ones, are not fully appreciating just how big vertical AI agents are going to be," said Jared Friedman, managing partner at Y Combinator, in a recent roundtable video titled Vertical AI Agents Could Be 10X Bigger Than SaaS with other execs. "It's not a new idea, some people are talking about vertical AI agents, we funded a bunch of them, but I think the world has not caught on to just how big it's going to get."
So how big is that? He made the case for $300 billion-plus companies starting up.
That will shake up the SaaS space, and Diana Hu, general partner, noted these new companies will be more efficient in doing tedious work, leading to lower employee counts.
"I agree," said Friedman. "I think it's very possible the vertical equivalence will be 10 times as large as the SaaS company that they are disrupting."
Friedman and Hu were joined by Garry Tan, president and CEO, and Harj Taggar, managing partner, as part of a Lightcone Podcast series, whose episodes further show the company's emphasis on AI agents, with titles including:
The description for the latter says: "As LLM's become exponentially better it is clear that vertical AI agents are key to the next generation of billion dollar SaaS companies."
As Friedman noted, the idea isn't new, as autonomous AI agents are advancing rapidly, being able to take over computer operations on their own and perform reasoned tasks.
Research firm Gartner predicted agentic AI would be one of the top 10 strategic technology trends for 2025.
[Click on image for larger view.] 2025 Gartner Top 10 Strategic Technology Trends (source: Gartner).
Vertical AI agents are said to be disrupting the SaaS space because they represent a shift in how specialized tasks and industries are addressed, offering tailored solutions with a depth and efficiency that general SaaS platforms often cannot match.
For example, many traditional SaaS platforms operate on a horizontal model, offering broad functionality for a wide range of use cases. Vertical AI agents challenge this by targeting high-value, niche segments where they can command premium pricing due to their specialized capabilities.
In discussing current companies in the space, Tan mentioned Outset, for AI-powered user interviews. "They're taking LLMs to the surveys and Qualtrics space," he said.
Another subcategory is "voice companies," with Hu noting she works with Salient, which automates voice calling, providing AI servicing for auto lenders.
In closing, Tan said that while AI robots will be doing "dirty and dangerous" jobs, vertical AI agents will be doing "boring" jobs, such as data entry -- but that's where the money is.
Further reading about AI agents can be found on Y Combinator's Hacker News site, with recent posts including:
About the Author
David Ramel is an editor and writer at Converge 360.