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AI Infrastructure Software: The Next Wave of Enterprise Value Creation

December 15, 2024·8 min

AI Infrastructure Software: The Next Wave of Enterprise Value Creation

The AI application layer has captured headlines, but savvy investors are increasingly focused on the infrastructure layer—the picks and shovels of the AI gold rush.

The Shift to Infrastructure

After observing deal flow at Goldman Sachs and Guggenheim Partners, a clear pattern emerges: while AI applications are exciting, the real sustainable value lies in the infrastructure enabling them.

Key trends:

  • Vector databases seeing explosive growth
  • Model serving and orchestration platforms gaining traction
  • Data pipeline tools becoming mission-critical

    • Why Enterprise Incumbents Win

    Unlike consumer AI, enterprise infrastructure rewards:

  • **Trust & Compliance**: Established vendor relationships matter
  • **Integration Complexity**: Switching costs are prohibitive
  • **Support Infrastructure**: 24/7 support for mission-critical systems

    • Companies like Databricks (my team's Series L deal) exemplify this - they're not just building new technology, they're becoming the data platform layer for AI.

    Investment Implications

    For growth equity and late-stage VC:

  • Look for revenue retention >130%
  • Focus on net new ARR growth
  • Evaluate multiproduct attach rates

    • The infrastructure layer offers better unit economics and more predictable growth than the application layer—exactly what institutional investors want to see.

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