Executive Summary
Rick Heitzmann observes a fundamental shift in software procurement as CIOs reconsider their entire tech stack through an AI lens. 'All the churn that you're seeing in the public names because their last generation is actually benefiting the private names in our portfolio,' he states, highlighting how companies like Twilio are losing market share to next-generation messaging platforms that deliver 80-90% of the value at half the price. This disruption cycle mirrors the post-dot-com era when infrastructure players went bust while application-layer companies captured value. Jesse Chasse from RBC Capital Markets confirms this dynamic, noting that equal-weighted software was down 11% in 2024 while private AI-enabled competitors show 10x year-over-year growth. The convergence of three factors creates a unique opportunity: AI tooling has made software development cheaper and faster, enterprise buyers are actively seeking to replace legacy systems, and the IPO window is opening for these disruptors. Heitzmann's portfolio companies are 'beating plan by a tremendous amount' and 'eating market share from the existing public players.' However, validation through insider activity reveals concerning signals - Twilio insiders sold $135M in the last 90 days with zero buying, while Salesforce shows mixed signals with $11M net buying but ongoing executive selling. The investment thesis centers on identifying which public incumbents face the greatest disruption risk while positioning for the next wave of AI-native companies preparing for public markets.
Key Insights
what Rick Heitzmann & Jesse Chasse said“I can deliver a better product that I can build cheaper and I can deliver 80% of the value, maybe 90% of value. In some cases, 110% of value for half price.”
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