The SaaSpocalypse refers to a crisis in the software industry exacerbated by AI disruption and high levels of private credit debt, particularly from leveraged buyouts (LBOs). Major software companies like Navan and Motive are struggling due to heavy debt loads and declining revenue growth. Private credit firms, which have heavily invested in these LBOs, face potential default rates as high as 13% if AI disruption accelerates. This could lead to a systemic risk similar to the 2008 financial crisis due to interconnectedness between banks and nonbank financial firms that hold private debt. The illiquid nature of private credit makes it harder to assess risks transparently, potentially delaying recognition of problems until they become severe. Orlando Bravo from Thoma Bravo estimates less than half of software companies will be significantly disrupted by AI but acknowledges the potential for significant impact on those reliant on technical competencies. This scenario could lead to a doom loop where reduced enterprise headcount due to AI leads to fewer
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