# SaaS 2.0: Free Tools, Paid Intelligence

**Podcast:** The Startup Ideas Podcast
**Published:** 2026-10-29

## Transcript

SaaS is dead, everybody.
And in today's video, I'm going to basically break down why I think that's the case, where the opportunities are, and what's really happening here.
And I think the people that understand where SaaS is really going, I think they're going to understand how they can reorient themselves to build something that people actually want.
So I'm going to make this the clearest breakdown on the internet for what's happening with SaaS, where it's going, why it's dead, quote unquote, why I think it's evolving into something else, what that something else is.
And yeah, by the end of it, you're going to understand it.
So how did SaaS typically work for the last 15 years was people basically built some code.
That was the software, right?
Software as a service.
They created some code and that code was essentially a tool.
So the hard part about SaaS was, can you get enough smart engineers in a room, pay them to code something out that was high quality, that worked, that was a tool for a human being to go and use, right?
And in exchange for using that tool, you paid money.
And the whole business model was a per seat basis.
So you would pay per seat, you know, $9.99, $29.99.
And you would go and access that tool as a service in the cloud.
And that was basically how it worked.
And for a long period of time, this model...
made people billions of dollars.
I mean, there's so many examples of SaaS companies that made billions of dollars.
Slack, for example, I think sold for $29 billion.
This model really worked for a while.
And the reality is it does not work anymore because AI makes the ability to create the SaaS super easy.
I think when we hit the Opus 5.5, GPT-6, Astra, That level of model, even argon, carbon, these models are so good that building the SaaS is not hard.
Cool, Greg.
That's very academic of you.
How can I actually go and...
build a SaaS that works in today's environment.
Let me explain where we're going with all of this in the simplest way I possibly can.
The new version of SaaS has actually a different business model.
In a world where the tool is so easy to create, and by the way, we're going to talk about the ICP and who to target later.
So stick around for that.
So you're still building a tool, right?
So you may be using AI to create the tool or AI with one human or two humans instead of no AI and 20 humans.
But you're creating a tool.
But the business model is actually free.
So you're actually giving away the tool.
I don't know why more people aren't actually doing this.
I tweeted this the other day, like give away the CRM, give away the dashboard, give away the app, get people onto the tool, find niches where there's something in this old model that people are paying for and literally give away the thing to the person for free.
We're going to get to how you can actually make money from this in a second.
But the value exchange here initially isn't the money, right?
So it used to be that you would go and pay for this.
So what are you giving here?
You're not giving money.
Well, you are giving data.
So that is going to help you make a better tool.
You are creating network effects.
And that's going to help you create a moat.
So that's the idea.
You're in the free tool business and you're going to be trying to acquire proprietary data which you can eventually sell or use to make your tool a lot better.
And then a tool that helps create network effects.
Now how do you actually make money from this tool then?
And by the way, I actually think that the market in this world, we'll call it SaaS 2.0 or SaaS 1.0.
This is what I would call dumb SaaS because it's just a tool.
And this is what I would call smart SaaS because it's intelligent.
And I'll get to that in a second.
You're basically upselling intelligence.
You're upselling intelligence.
So you're basically saying, hey, I'm going to give you away the CRM.
But if you want the CRM to go and do something for me with AI agents, that's going to cost you money.
And you can upsell that.
The other thing that you can upsell is some service.
So a service provided by humans.
And this is intelligence provided by agents.
So this is, you know, when Sequoia talks about trillion dollar services, the new software, they're talking about this.
And they're basically saying like, hey, there's going to be a tool and that's going to get you in and that's going to bring data and network effects.
And if you want a upsell, you can...
have a service.
Now, what's a concrete example of this?
In the consumer space, it would be something like a calorie tracking app, right?
The tool is free, but if you want to actually use agents to go and help you make personalized meal plans or give you more...
precise calorie tracking, you would have to pay for that.
Or if you wanted to be upsold to a weekly weight coach to help you get on track, that is something that you would pay money for.
So it's pretty interesting.
I think why it's interesting is this was kind of limiting the tool per seat.
was kind of limiting because not everyone wants to pay for tools.
But if you create essentially a product studio around free tools, get people in, get their data, get their network effects, and then upsell them either to AI agents or to human beings, there's a lot of niches that are just wide open right now that I think you can go and build stuff in.
So it excites me.
So when I see things, tweets and stuff like that around like SaaS is dead, period.
It's not that SaaS is dead, period.
It's SaaS is dead, long live SaaS.
This is like, you know, we're evolving from this, which is no longer a thing anymore.
Like don't, like it's dead.
Like don't create this, right?
The other, you know, the other thing to mention is, you know, you could, The business model of, okay, it's free over here, upsell to agents, how do you charge for that?
I mean, you can either charge by token, you can charge by pay per outcome, so if the agents actually do something.
And then for human beings, it could be weekly or a monthly fee.
So I think that the total TAM for total addressable market for SaaS is now bigger because the market for...
people accomplishing things is just a lot bigger than people actually using a tool to complete something.
When I posted about this whole smart SaaS thing and how SaaS is going to be free, my point is that SaaS is trending towards being free.
I think that this is sort of the price, where things are going now.
SMBs, prosumer stuff, it's going to be free.
But I do want to say, when it comes to enterprise, when I'm talking about enterprise, I'm saying like Fortune 500, 2000, those companies, they still might pay something per seat.
I think that number goes down over time.
And I still think that there's upsells to humans and...
super intelligence.
But the point is, some enterprises are just not going to want free stuff.
They're going to want to pay for the security.
They're going to want to pay...
Because it just feels good to pay because it feels like you're getting taken care of.
So I think that enterprise, they will still pay something.
But again, the main point I'm trying to make is it's going towards free.
I think for SMBs, you're going to see it becoming more and more free.
And individuals too.
I hadn't seen anyone really...
clearly explain this.
So I wanted to put it in here.
I think I'm happy to do more on this.
Just comment below, like, comment, and subscribe.
And I can do more on where SaaS is going, the niches, the opportunities.
If this gets 5,000 likes on YouTube, I will go and do more of that.
But yeah, I think this is a really interesting time to be creating SaaS.
This is the map.
Enjoy.
Go and do it.
Thank you for watching.
Thank you for listening.
Have a creative day, and I'll see you next time.