Coatue’s "10 brutal truths about AI" is a must-read on the trends driving the highest valued tech businesses right now. But they contain vital lessons for smaller software businesses too.

The gap between the future winners and losers has never been greater, at every level of the software market. As Coatue points out, ‘growth is rare,’ so identifying businesses with the right markers for success is critical. That means investors like us have to work harder than ever to find them.

𝐋𝐞𝐚𝐯𝐢𝐧𝐠 𝐧𝐨 𝐬𝐭𝐨𝐧𝐞 𝐮𝐧𝐭𝐮𝐫𝐧𝐞𝐝 𝐭𝐨 𝐟𝐢𝐧𝐝 𝐫𝐚𝐫𝐞 𝐠𝐫𝐨𝐰𝐭𝐡: The dual importance of growth and profitability is why we’re forensic in our search for the best deals. Within 18 months of launching, we've analysed hundreds of businesses across the whole of Europe. As a result, we’ve honed our pipeline to only those with top quartile revenue growth, and the ability to invest in continued innovation.

𝐁𝐮𝐢𝐥𝐝𝐢𝐧𝐠 𝐯𝐞𝐫𝐭𝐢𝐜𝐚𝐥 𝐥𝐞𝐚𝐝𝐞𝐫𝐬: “Vertical AI is Crushing Horizontal” applies to all software. That’s why all our businesses are vertical or niche-focused, from Relesys building employee engagement software for retail, to PriceShape, which serves mid-market e-commerce, and SecureFlag, which provides cyber security training to businesses with 50+ developers. Serving one audience really well is the secret to market leadership.

𝐀𝐈-𝐟𝐢𝐫𝐬𝐭 𝐟𝐨𝐮𝐧𝐝𝐚𝐭𝐢𝐨𝐧𝐬: The companies we back are in the early stages of their AI journeys, but all have the foundations for fast adoption. The best founder-led businesses today are product visionaries, know their customers intimately, have a depth of data, and modern tech stacks. That means they’re able to build AI that delivers real value, while adopting tools quickly to supercharge internal efficiency.

AI isn’t killing software, it’s powering even faster, more profitable growth. The best founders are responding, as they always do, and the opportunity to reap the spoils is greater than ever.