SaaS Created 300 Unicorns. YC Predicts Vertical AI Agents Could Be 10X Bigger.
In the past 20 years, SaaS companies captured 40% of VC funding and created 300+ unicorns.
But YC thinks that's nothing compared to what's coming with vertical AI agents.
Here's why they're betting the next wave of billion-dollar companies won't just replace software - they'll replace entire teams:
Their latest conversation made it so clear - Vertical AI agents are at the perfect timing to outscale SaaS by 10X.
Here's the top 5 points that build up this excitement: 🧵
📒 Read the Full Breakdown and get access to YC's Startup Dashboard in our Newsletter (for Free)
enteroverdrive.beehiiv.com/p/why-yc-predicts-vertical-ai-agents-will-be-10x-bigger-than-saas?draft=true
1️⃣ We’re at an Inflection Point
"Every 3 months, things get progressively better. Now, we’re talking about vertical AI agents that could replace entire teams and functions."
Vertical AI agents don’t just automate—they specialize, adapting to specific industries like healthcare, finance, or logistics.
The best part? OpenAI's monopoly is ending.
Growing competition between foundational LLM companies is creating fertile ground for innovation.
2️⃣ History Repeats Itself
2005: "No one believed enterprise software could work in a browser."
2024: "No one believes AI can handle complex business tasks."
SaaS proved the skeptics wrong then.
Today, there's a similar disbelief around AI agents.
Vertical AI is about to do the same.
3️⃣ The Scale of Opportunity
Over the last 20 years:
✔️ SaaS captured 40% of all VC funding.
✔️ Created 300+ unicorns.
✔️ Transformed how we work
YC's prediction?
Vertical AI will be even bigger, with multiple $300B+ companies emerging in this space.
"Imagine that for every SaaS unicorn, there will be a vertical AI agent unicorn."
Dig deep enough, and you’ll uncover billion-dollar startups waiting to emerge.
4️⃣ Why This Time Is Different
Traditional SaaS companies need thousands of employees to scale. But vertical AI companies can do more with far fewer people.
And even bigger than this... they are bullish because these Agent's offering is not only cut software costs but to cut down payroll costs (a 10x higher expense than software costs in enterprises).
"In Saas you need people to do everything. In AI Vertical agents you'll not get the same software but also eat most of the payroll."
5️⃣ Where To Look
The biggest opportunities? Look for boring, repetitive admin work.
As one YC partner put it: "If you dig deep enough into these problems, there's likely a billion-dollar AI agent startup waiting to be built."
Working in automation for 3+ years, and building agents for companies in Overdrive, I see new cases of highly-automatable repetitive work daily.
Build that awareness for yourself:
→ Talk to customers.
→ Immerse yourself in the industries you want to innovate in.
SEE THE BIG PICTURE!!!
The real opportunity isn't in flashy consumer AI.
It's in solving specific industry problems at scale.
While everyone's distracted by ChatGPT and consumer AI, the real transformation is happening in vertical B2B applications.
YouTube, Twitter, and LinkedIn will continue to buzz about the latest consumer products and shiny new LLMs.
But the edge belongs to those who can see past the hype—to solve real, industry-specific problems.
Just like SaaS, the winners will solve specific challenges at scale—and the next 24 months will be critical in shaping this landscape.
Which industries are embracing this shift first?
🔖 Tag your favorite Vertical AI Agent company in the comments (with the industry they're working on)!
📩 Check out our newest newsletter where we make the full breakdown:
🔗 Read it here: enteroverdrive.beehiiv.com/p/why-yc-predicts-vertical-ai-agents-will-be-10x-bigger-than-saas?draft=true
🎉 Plus: It includes access to YC’s Startup Dashboard—a must-have for anyone building in this space.