#208: How AI Rewrote What Active SaaS Buyers Want in 2026 - Mike Lyon · Practical Founders Podcast summary

Key takeaways

Buyer criteria for SaaS exits are changing rapidly in 2026, primarily due to AI concerns.
A 90% gross retention rate now serves as a key proxy for AI resilience and overall business robustness.
Systems of record with proprietary data and payment functionalities are more attractive and AI-resistant than point solutions.
Founders should understand the diminishing aperture for premium valuations—those fitting the new criteria tend to command higher multiples.
Early and transparent data cleanup, along with strategic storytelling, are essential for passing due diligence and maximizing valuation.
A broad, non-exclusive, and well-managed sales process will help maintain leverage and achieve better outcomes.
Founders should be prepared for longer holds, evolving roles, and the importance of strategic timing in exiting their businesses.
Pay attention to actual financial commitments from buyers during diligence to gauge genuine intent and interest.
Leveraging AI within your services can expand your business’s total addressable market and margins, turning a threat into an opportunity.

Summary

Recent Shifts in M&A Buyer Criteria in 2026

The episode highlights a dramatic and rapid shift in the criteria that private equity and strategic buyers use to evaluate SaaS companies this year. Historically, buyer standards remained relatively stable, focused mainly on growth and retention metrics. However, in 2026, these standards have been changing weekly, driven by the evolving AI landscape. Presently, buyers emphasize a 90% gross revenue retention as a proxy for AI resilience, reflecting their uncertainty about AI threats. The focus now is on business systems of record that possess proprietary data or a payments component, which are viewed as more AI-resistant than point solutions. The episode emphasizes the importance for founders to understand these shifting benchmarks early, as the criteria for a premium exit are narrowing.

Impact of AI on Valuations and Business Strategy

The discussion underscores how AI is reshaping valuation dynamics and strategic assessments. Companies with high gross retention, real data moats, and the ability to hang AI agents off their backbone now command higher valuations. Conversely, horizontal point solutions and non-vertical SaaS are increasingly at risk due to AI's potential to disrupt these markets. Founders are encouraged to leverage the opportunities presented by AI to expand their service offerings, potentially entering higher-margin AI-enabled services that complement their SaaS offerings. The episode also notes bifurcation in valuation trends based on how well a company fits into these new criteria, with some valuations increasing by 30% and others declining by a similar margin.

Private Equity, Strategic Buyers, and Exit Strategies in 2026

The episode explores the new landscape of buyers, which now includes a diverse range of private equity firms, growth investors, and private-equity-backed strategic buyers. There’s a focus on the importance of understanding the type of buyer interested in a company and the specific flavor of their investment approach—whether it's a quick flip, a buy-and-hold, or a takeover with added management roles. The discussion covers the changing nature of exit timelines, with private equity firms planning longer holds and the second-bite strategies gaining popularity. Founders are advised to consider how their roles might evolve after sale, and the importance of a well-managed, competitive process to maintain leverage and avoid buyer retrades.

Preparation and Process of Selling a SaaS Business in 2026

The episode provides practical advice for founders preparing for an exit. Key points include the necessity of data cleanup, understanding buyer evaluation metrics (such as product-market fit and retention), and managing expectations. Data accuracy and clear storytelling are crucial for passing due diligence. The typical sale process starts with benchmarking the company's health, followed by a broad, non-exclusive marketing phase, and involves controlling the timing of diligence and exclusivity to maximize leverage. The episode stresses the importance of transparency, and early disclosure of negative issues, and managing founder stress throughout what can be a highly emotional and meticulous process.

Advice for Founders About Navigating M&A in 2026

The episode concludes with strategic advice for founders. It emphasizes that many founders misinterpret interest from buyers; inbound interest does not equate to a high-value bid. Founders should pay close attention to the actual money spent on diligence as a more reliable indicator of genuine interest. The importance of understanding who the potential buyers are, their motivations, and their typical behaviors is highlighted. Founders are encouraged to be flexible about their role post-sale, understand that longer holding periods are now more common, and recognize that a well-timed exit and strong preparation contribute significantly to a successful and lucrative sale.

Show notes

Mike Lyon is the founder and managing director of Vista Point Advisors, a boutique sell-side investment bank he started almost sixteen years ago. A former chemical engineer at Exxon and BP who later joined Citigroup's tech M&A team, he built Vista Point to solve a conflict of interest he watched play out on Wall Street: bankers quietly working both sides of a deal.

Vista Point Advisors represents founder-led software companies only — never the buyers — focusing on vertical SaaS with enterprise values between $30 and $300 million. Mike and five other managing directors run about a dozen deals a year, spending 50 to 100 hours cleaning up each company's data before launch and running a long, non-exclusive process built to keep multiple buyers competing to the finish.

Mike says buyer criteria changed this year for the first time in a decade, and changed fast. Buyers now demand roughly 90% gross retention as a proxy for AI resilience, favor systems of record with real data moats, and discount horizontal point solutions. His advice: understand exactly how you'll be graded long before you go to market, because the aperture for a premium exit keeps shrinking.

Key Takeaways

AI Changed Everything — For the first time in a decade, buyer criteria are shifting week to week this year.
Gross Retention Rules — Buyers now want 90%-plus gross retention as a proxy for AI resilience.
System Of Record — Point solutions look exposed to AI; systems of record with real data moats win.
Exclusivity Is Leverage — Once you grant it, the deal slows and power shifts to the buyer.
Watch Spend, Not Talk — Every buyer says the right things; only diligence dollars prove real intent.
Second Bite Pays — Most founders who sold majority to PE did as well or better on the rollover.

Quote from Mike Lyon, Founder & Managing Director of Vista Point Advisors

"For the first time in ten years, the rules hav changed — and they changed fast. If you called any private equity or strategic buyer over the last decade and asked what makes a good SaaS company, the answer barely moved. This year I've had conversations I've never had before, where the criteria shifted week to week — first it's X, then X plus Y, then X plus Y plus Z.

The first big change is a maniacal focus on gross revenue retention (GRR). Net retention (NRR) was the star for years, but gross gives you no credit for upsells — you only get dinged for downgrades and churn, so it's really asking what happens if you can't upsell anymore. Buyers want to see 90% or better now, and our read is that it's a proxy for AI risk: they don't fully understand the AI threat yet, but they know a business at 90% gross retention is probably resilient enough to take some hits and survive.

System of record is the other thing that suddenly matters more. Point solutions feel like they're at further risk from AI, so buyers want a system of record with a real data moat — not the fake moat where anyone can go get that data somewhere else — or a payments angle, which is harder for AI to route around. And if your business started eight years ago, it's hard to be fully agentic, but you at least need the ability to hang agents off the backbone of your software to keep delivering value."

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#208: How AI Rewrote What Active SaaS Buyers Want in 2026 - Mike Lyon