“No. I would say if you're a pure software investor, you're kind of fucked, honestly. And I'll say that pretty confidently because SaaS, I don't think, is going to be where you gain margin anymore. … I just don't see software being a huge market in 20 years.”
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch · Startups & Venture · October 2026
Harry Stebbings asked whether today's investors are equipped to back hardware companies. Rao argues that SaaS boomed because cloud made software frictionless to launch, and that value is now shifting to the intelligence layer and the hardware underneath it.
Transcript
…have an advantage because you can still squeeze more juice out of like, hey, I convert energy to intelligence more efficiently. We have more, well, a lot more juice to squeeze there versus the infrastructure layer, in my view. I actually think the hardware is the place to be over the next 10 years.
Dude, it's quite fucking hard doing hardware investing. It's a very different mindset. Is this generation of investors equipped to be hardware investors?
No. I would say if you're a pure software investor, you're kind of fucked, honestly. And I'll say that pretty confidently because SaaS, I don't think, is going to be where you gain margin anymore. And we had this sugar high for the, since what, 2011, 2010 timeframe till now of, you know, I can very quickly spend something up on an AWS cloud service, test the market quickly, try things out, and then go after $100 million or $200 million market. SaaS was like massive fragmentation of the market because the delivery mechanism became very easy and frictionless. Now we're in this place where applications start to become more about the intelligence layer. And I just don't see software being a huge market in 20 years.
Do you not just think SaaS becomes Lagora? And what I mean by that is like, is Lagora SaaS? Well, kind of, yeah, enterprise SaaS, but kind of not. No. So does like the semantics not just change? I don't think anyone really is like starting fresh being like, oh, we're a SaaS company.
Right. So exactly. I think you're right. So I was taking the classic definition of SaaS, I suppose. But I think companies where you deliver an outcome and you do so through a combination of software and services, absolutely. You know, we're seeing that in several companies. I mean, I invest pretty…
We see it, you know, I call it word wank, which is where like, you know, VC has come up with a coin theory of the world. And it's like, you know, the trillion dollar services thing. You know, I think Sequoia did a brilliant piece on. And I love Julian who did it. It's very good. But like, are we…
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