Accel bets on AI-powered SaaS, warns against episodic start-ups

AI is transforming customer service, marketing, testing, and even healthcare SaaS

Accel is doubling down on AI-led SaaS applications, even as it warns of the risk of ephemeral “shock” use cases in the booming artificial intelligence space. Speaking at a recent media roundtable during the Accel AI Summit, top executives shared insights on start-up durability, AI-driven productivity, and the evolving venture capital landscape.

“Durability of the use case is important. A ‘shock’ use case — like image generation tools — gets quick traction but doesn’t solve a real, persistent need,” said Shekhar Kirani, Partner at Accel.

The firm sees multi-product, deep-product strategies as the future of enterprise AI, where software is no longer engineering-constrained but “thinking-constrained.”

“Product managers spend all their time killing features because there aren’t enough engineers. AI is changing that,” said Kirani, adding that AI could offer 2x–3x productivity boosts.

Accel highlighted platform traction in the US Bay Area as a credibility requirement for global success, even for Indian start-ups.

“I can’t convince Indian portfolio companies to use Indian platforms unless someone in the Valley is using them. Engineers trust products with Valley credibility.”

Indian SaaS players are under pressure to evolve. While AI-native start-ups promise breakout valuations — 3x–4x higher than traditional SaaS — many are still raising on perception, not revenue.

“Most are raising on hype. Investors expect AI companies to hit $100 million revenue in 12 months — it’s a different scale of expectation.”

Accel also flagged sector-specific disruption: AI is transforming customer service, marketing, testing, and even healthcare SaaS.

“Companies like BrowserStack are innovating with AI-based test case generation… Zenoti is cutting down front-desk staffing with voice scheduling.”

While AI lowers cost of content generation, it also increases the burden on consumer attention.

“Cost of production is near zero, but my cost per minute is very high. I need tools that filter content for relevance.”

Despite the optimism, Accel noted that real AI-first companies with growing revenue are still rare, and that judgment remains core to venture capital.

“If AI flattens growth and revenue expands just 10–20 per cent, VC doesn’t work. But if some companies grow 200–300 per cent annually, VC will thrive.”

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Published on June 4, 2025