Welcome To The ‘Show Me’ Era: Sapphire Ventures’ Anders Ranum On What Separates Winning AI Startups From The Rest

Public market software multiples are hovering at decade lows as investors price in the long-term risk of AI disruption. Meanwhile, private market valuations for AI startups continue to hit record highs. Striking a balance between these two conflicting signals is the central challenge for today’s growth equity investors. To understand how institutional capital is navigating this gap, Crunchbase News recently interviewed Anders Ranum , a partner at Sapphire Ventures . Ranum has spent nearly 15 years at the firm, where he focuses on B2B enterprise software, security and industrial infrastructure. Prior to joining Sapphire, he spent 12 years as a product management and strategy executive at SAP . His recent investments include core infrastructure plays such as LangChain and WorkOS , as well as the industrial AI platform Tractian . In this e-mail interview, Ranum breaks down how the definition of net revenue retention is shifting, why he believes 2026 will see a historic run of major tech IPOs, and where real enterprise demand is materializing on the factory floor. This interview has been edited for clarity and brevity. Crunchbase News: You’ve been at Sapphire for 15 years. Right now, public market software multiples are at decade lows as Wall Street worries about AI disruption, while private AI valuations are hitting record highs. As a growth investor caught in the middle, how are you valuing companies today? Are traditional growth metrics like net revenue retention still the gold standard, or has the math completely changed? Anders Ranum, partner at Sapphire Ventures. (Courtesy photo) Ranum: The gap between public and private market signals right now is unlike anything I’ve seen. I think it creates a real opportunity for investors who can make sense of it. Public software multiples have come down hard, while private AI valuations are hitting record highs. Those two things can’t both be right indefinitely, but the fundamentals underneath are holding up. Gross margins, free cash flow, and NDR have actually improved. The market is broadly pricing in disruption risk, but the companies that are genuinely building enterprise value are still being built. What that means for how I evaluate companies is that I’m spending more time on whether something is genuinely embedded in how enterprises work, not just whether the numbers look good today. NRR still matters. It tells you whether customers are finding real value. But it’s a lagging indicator. What tells me more is whether switching away from a product would meaningfully disrupt operations. If the answer is yes, that’s a more durable signal than any retention metric. The current regulatory environment has essentially frozen large-scale tech M&A, and the IPO market is sluggish. If the traditional exit pathways are bottlenecked, how does that change the way you underwrite a Series B or C bet? Do companies just have to stay private and build to massive scale longer than they used to? Ranum: I’d push back a bit on the framing that M&A is frozen. Software M&A activity actually picked up meaningfully in 2025, with deal value rising 40% year over year to $334 billion across 678 transactions. We saw that in our own portfolio with over half a dozen acquisitions in the past six months. What’s changed is the pricing. The valuations are being reset, but the deals are getting done. On IPOs, I believe 2026 is shaping up to be a historic year, with SpaceX having gone public, Anthropic having filed, and OpenAI reportedly set to file soon. If they follow through, we’re looking at some of the largest IPOs ever over the next several months. That’s a remarkable moment. Below that tier, though, the picture is more nuanced. Companies that meet today’s higher bar will wait for more favorable conditions, likely into 2027 or beyond. That means you have to build accordingly, focusing on margin alongside revenue, so you have real optionality when the time comes. The secondary market also helps, giving companies and their investors more flexibility as they wait. You used to love investing in what you called “boring software,” or tools that quietly automated mundane enterprise tasks. Today, every software company claims to be an AI company. In 2026, does traditional SaaS even exist as a viable investment category anymore, or is a software startup inherently unbackable if it isn’t AI-native from day one? Ranum: I don’t think the narrative is AI vs. SaaS. Instead, it’s AI plus SaaS. The companies that are struggling aren’t struggling because they’re SaaS businesses. They’re struggling because investors are in a “show me” era, and they don’t have clear answers yet. Show me the free cash flow. Show me the path to profitability. Show me how AI is actually helping you win. You can’t get a stock bump anymore just by claiming you’re integrating AI. The market wants evidence of monetization. The way I think about it is whether a company is building something that fundamentally changes how work gets done, or just layering AI on top of a workflow that a human is still doing. We used to back systems of record and workflow companies where the human was doing all the work. Now we’re in a position where the system itself can come in and actually do some of those tasks. That’s a different category of value entirely, and it changes what we look for. The bar has moved, but the opportunity is very real for the companies that can clear it. Your core thesis is that the LLM stack is fracturing into distinct, standalone billion-dollar layers, such as orchestration (LangChain) and identity (WorkOS). But we’re seeing a massive border war. Big model providers like OpenAI are building their own tools, and data giants like Databricks are buying up security tools. How do standalone startups protect their turf when giants encroach from both sides? Ranum: Both fracturing and consolidation are happening simultaneously, and I think that’s actually the right way to think about it. The moat isn’t about being first in a category. It’s about becoming genuinely embedded in how enterprises work. The companies I’m most excited about are the ones capturing orchestrated workflows in which the enterprise’s actual processes run through the product. That makes them very hard to displace, regardless of what the giants are building around them. Because of your background at SAP, you know how enterprise buyers think. Right now, CFOs are looking at massive AI pilot bills and demanding to see actual ROI. When a startup is pitching an enterprise on a software governance or security tool, how do they defend that line item to a cynical CFO before the enterprise has even fully figured out its core AI strategy? Ranum: What we consistently hear from buyers is that trust has become what actually separates the market. Security, governance, compliance, and auditability aren’t nice-to-haves anymore. They’re what make an AI deployment defensible when the CFO or the board asks hard questions. And cost predictability is right alongside that. We’re in an era of greater focus on ROI, and enterprises want to know what this will cost them at scale before they commit. The vendors that can answer that question clearly are winning deals over the ones that can’t. It feels like Silicon Valley is obsessed with the glamour of humanoid robots right now. Meanwhile, Sapphire’s big bets in this space, like Tractian, focus on practical, unglamorous industrial AI and predictive maintenance. Are humanoid robots an expensive venture capital distraction right now? Where is the actual, contract-signing enterprise demand on the factory floor today? Ranum: The near-term ROI story is in constrained, high-value industrial settings such as packing, picking, inspection, and maintenance. These environments have clear labor economics, manageable deployment