Just an Agent Away: Deconstructing Today's AI Agents Landscape (Eximius Ventures)

Summary

• Menlo Ventures' 2024 survey of 600 IT decision-makers showed AI agent adoption rising from zero in 2023 to 12% in 2024.p.14
• Cursor reached over $100 million in ARR and a $2.6 billion valuation, helped by a simple UX for viewing and applying code diffs.p.11
• Sierra AI grew from $1M to $20M in under a year.p.15
• A competing reasoning model is priced at $2.19 per million tokens versus $60 per million tokens for o1.p.9
• AI-native CRM Clay is expected to achieve >$500M ARR.p.12
• Voice AI alone could create an additional $10B in software TAM in the next five years.p.17
• AI applications threaten the traditional 80-85% margins that software incumbents have enjoyed.p.13

Key insights

1. An AI agent is defined as a system that uses an LLM to decide the control flow of an application.p.5
2. Proprietary datasets and custom architectures are overhyped moats, while distribution, domain expertise and workflow integration are the actual moats.p.9
3. Successful production systems keep human oversight for the critical 5-10% of cases where errors could be costly.p.14
4. Sierra and Profit Security both achieve 90-95% automation while maintaining human oversight for challenging cases.p.14
5. Incumbents face revenue cannibalisation, margin erosion and seat-based pricing constraints when adding AI.p.13
6. Even robust growth to $10 million or beyond no longer guarantees a path to $100 million.p.16
7. Glean shows enterprise DAU/MAU ratios consistently above 50%.p.16
8. Agentic startups often pass $5M or more in ARR within the 12-18 months SaaS companies once needed to reach their first million.p.15