Transcription
We need to talk about why preede and seed investors will not fund SAS in 2026. Even if you add AI, doesn't matter how much AI you add to it, why it's still not going to get funded. And this is based upon what I'm seeing from investors and what I'm seeing from founders getting funded and some of the trends that I want to warn you about because I always want you to be prepared for what's going on. I'm also going to tear rank what will get funded to give you an idea of how much you have to push yourself to the point where you can secure that preede or seed funding.
Before we continue, my name is Ed Kang. If we met before, welcome back. Thanks for dropping by. As always, use the chapter markers to skip ahead to the right part of the video. If we haven't met, I'm a seven-time funded founder with two exits. And that's just a fancy way of saying I've failed a bunch of times to your benefit because I use YouTube videos like this and my channel to try and help founders of all stages, but especially early stage founders raising early stage capital avoid some of the catastrophic mistakes that I've made. It's not to say you're not going to make mistakes, but I'm going to try to make your life a little bit easier. Also the chief strategy officer for startups.com. I myself have raised over $100 million for my startups, other startups, as well as startup funds. I work with a team at startups.com who work with hundreds of founders at a time and they have helped founders raise $750 million for startups that have gone on to raise billions more by going public.
Now, let's jump into why preede and seed funding will not go into SAS as you know it and what to do in 2026 and beyond. Our first step is to define SAS itself and that's an acronym that stands for software as a service. We all know how this works. Typically, a software is hosted on the cloud. You pay a subscription service and you get access to it and it does things for you. Simple as that. And that's what a lot of people are doing with AI. They're building more software that incorporates AI to provide those services. SAS in many founders eyes and in the industry right now is alive and well. You see companies like Salesforce or HubSpot or in the marketing and sales tech, they're adding AI features. They're all over the place. I get it. It's a hot space to be in, especially when you're selling B2B.
But what happens when you have a userdriven ondemand software agent? Think about all the vibe coding that's happening right now. You use the English language, not some fancy programming language to say, I want to build this software. I'm doing it right now with ChatGpt and the folders and the project management and now the AI agent tools. I'm basically telling ChatgBT, build me an app or start tracking this. I tell it the result that I want and it goes out and does it for me. I don't have to go to a company to access their SAS. I'm basically building my SAS on the fly on demand based on what I want. It's customized to me. I can't tell you how many apps that I've replaced for myself basically using Chat GPT or whatever LLM out there and the agents how easy it is to access them and to get them going. It's pretty simple. And therein lies the danger because as soon as you can have something on demand, it's not about I need a specific software. I need a service that's going to build me the software on the fly when I need it, how I want it. And that's going to be the future. It's no longer be I have an app for that. It's going to be I have a tool that will build an app for you for that. And I think we are only two maybe 5 years away from that becoming reality. Which means all the SAS out there right now where you have to go download some type of program, you get access to an interface, some type of database, that's going to go away because we're going to have persistent databases built by AI, managed by AI that mold to our lives plus an application layer that we can access on the fly. We can literally say this is what we want and it's going to build it just for us. We don't have to worry about distribution. It literally will be on demand, userdriven, all generated by us. We're seeing this with Gen AI right now where you can literally say, "Here is a video that I want and it will build it for you." That's going to affect the creator economy and all content in the future. Well, it's going to affect SAS. I'm letting you know right now the writing is on the wall. This is not some way out there sci-fi me pontificating and philosophizing, theory crafting. It is happening right now and you have to pay attention.
Just to get a little cheeky, I'm calling this AS A or agent as a service. Yes, it's an unfortunate acronym, but think about it. Right now, agents as a service are starting to come up. They're bubbling up to the surface, and people are starting to get wise to it. And it's only a matter of time before we start adopting this. Instead of accessing a SAS, we access a AAS, agent as a service and say, let's just have an agent build something for us as we need it. But here's the thing, we are not totally there yet. User behavior hasn't completely changed. And I'm going to argue in future videos, they're coming out soon, that we're in a bubble and we need to see a correction towards business models that actually work and start to make money. It's not the same as the dot days where we're getting a lot of eyeballs. I worked for a lot of those.coms. The eyeballs were the growth and we ignored revenue and the days where hyperrowth was the priority. I'm not seeing that get repeated and history may not repeat, but it definitely rhymes. We're seeing a lot of investment in infrastructure. We're seeing models start to change and people are starting to figure out where AI can really make the difference and that's an opportunity for you if you avoid some of these pitfalls.
So, what I'm going to do is give you a framework to rank your ideas and what you're building. And we're looking at from A to S tier, that is a pass from B down is going to be a fail. And that's because preede and seed investors, this is very important, they want to invest in winners. You have to be in the upper echelon of these tier rankings to get funded by preede to seat. It's not to say some of these other models aren't going to be successful in their own right, but we're talking about venture capital here and they need you to 100x their money. That's why you have to be thinking, I need to be in A to S tier, not B down if you're going to be accessing this type of funding in 2026 and beyond.
Let me clarify. I believe every founder has a better than 0% chance of going total unicorn, raising unicorn money from VCs, and going out there and having that glorious $1 billion exit. In fact, today we are looking at exits even better than $1 billion. Decacorns and centacorns are becoming a thing. That's going to become more common as this AI revolution takes hold. But that's if you want to build a unicorn with a U and VC is going to fund you and you need to 100x their money. You may want to build a yo unicorn that just makes money for you, for your lifestyle, and that's totally fine. And you can ignore a lot of these rankings. You want to be pushing up as high as you possibly can, but if you're not in the S and the A tier, no harm, no foul. You'll do totally fine with these other rankings, but you have to move fast. And you're going to see that speed and momentum are the key because things are changing so rapidly week to week. And you have basically, I would say, 2026 to get this figured out because that's when the shift is going to occur, that correction that I'm talking about. And these videos are going to come out. I'm going to be talking about this more and more. Not to be fear-mongering or doom and gloom, but to prepare you for the future because I want everybody watches my YouTube channel to be successful building yo unicorns. And if you happen to be in the top 1% that builds the unicorns with the U, so be it. More power to you. Let's work on it together.
Starting from F tier, bottom up in terms of funding. And there is an F. That is if you have a concept and a concept alone. Anybody can have a concept. And if you can't take it to the next level and actually build something with it, you're going to have a much more difficult time getting funded in 2026 and beyond because it's so much easier to build things. I already mentioned Vibe Coding, but it's only a matter of time before we start seeing other platforms add on not just Vibe coding to build development, but also distribution to get things out there and to monetize as quick as possible. So, if you're at a concept, you want to go up at least one level to the deer tier, which is a feature. That is something that you can build on top of something else and add a feature to what's already going on out there. Maybe it's a one-trick pony. You just do one little tiny thing, and that's fine. I know founders who are making over a million dollars a year with one feature. Their startup does one thing. You come and they've got AI doing one thing for you, and that's fine. But it's still in Dtier when it comes to funding preede and seed.
The next level up at Ctier is to build a tool. That's when the features come together where you got a tool to do a specific thing. A tool to fix a specific problem. I see tools like co-pilots and assistants pop up all the time. And that's fantastic. We need tools from everything, not just B to C, but B2B and even how we build our startups internal operations. If you can provide a specific tool and put that into the toolkit of your users, you'll be just fine. But it's still Ctier when it comes to funding.
What's next? Well, then you got to build a product. And that's a set of tools that come together. And it's a specific product. This is what I have that I'm going to go out and purchase. And it is allencompassing. Let's use an industry that I access all the time. Image creation, editing, management. A tool that I use is Midjourney, but I swap out tools all the time. Sometimes I use Chat GBT to generate images for me. Midjourney is one of the tools that goes into my kit. Adobe has Creative Cloud and they are a product unto themselves with several tools. Think of the toolbox as the product. Here's the difference when it comes to how I think about it. When I think about general editing, everything to do with image editing, even video, I think about Adobe as the product that I want to go out and purchase. When I want a specific tool for very specific purpose, such as a specific type of socket wrench, if I'm doing mechanics, I think about the tools out there such as Midjourney, which I use specifically for things like animationbased images or anime or manga. Products get me entrenched. I'm a regular user where tools I can swap in and out. And so, a lot of toolbased companies are trying to become products by bolting things on. The issue is I put this at a B tier is it's very difficult to build out of the gate especially at preed seed levels a suite of tools that go into a product. If you can do so, that's great. But I find idea validation, customer discovery, all those initial early stage activities for a startup very difficult when founders are thinking about their ecosystem, the all-in-one product, the platform. Platforms can be products as well. I find that founders struggle there and therefore they don't get the traction and it's very difficult to raise.
So what is the A tier that preede and seed investors are willing to fund? That is if you're building towards an outcome which leads to mind share. Now, before you get confused thinking, well, don't all products and tools or features or even concepts promise a type of outcome? But remember, I'm talking about what is going to get funded? And this is a fundamental mind shift, a paradigm shift, if you will, just a different way of thinking for how you present to investors and how you're building to capture that mind share because that's what investors are looking for. Have you captured not market share that comes later when you're funded, but mind share? Have you captured the imagination? Are you getting this sort of new wave of interest, novelty that nobody else seems to have?
Let's use an example we're all familiar with, Amazon. When I use Amazon, I buy products from Amazon. Great. Everybody's competing to sell the products on Amazon. Amazon has tools that allow me to track my orders and to read reviews. They've got a suite that allow me to have a better experience, and that's fantastic. But the outcome that I go to Amazon for is fast delivery. I could easily be using tools to shop for other products from other sources, but the outcome that I want is convenience. And that's what Amazon sells to me all the time, and they put it up front and center. Let's move to Airbnb for a moment. Airbnb, their products were the bedrooms or the suites that you could go rent. They gave you tools to find them. They give tools for people who are landlords or who own the homes to provide the supply and tools for us to go access the supply because we have that demand. But the outcome that Airbnb promises is that you belong, that you will go, not only will you have a cheaper stay, which really is kind of a phantom promise at this moment in time. It's not cheaper. In fact, I found hotels that are way more convenient, way cheaper, but you can go experience like you are living there, that you are living in a home, you make friends. That's what Airbnb figured out. And that's why the outcome now they're pushing into is that you will have experiences which increases their valuation which is just part of the game when you have a unicorn startup. That's what you have to be thinking about.
So why did vibe coding catch fire and why is it funded in some of the fastest growing unicorns or generative AI? Because the outcome is you can basically talk in plain English, say whatever you want, whatever you can imagine and it will build it for you right there on the fly with speed. You don't have to hire artists. You don't have to hire engineers. You don't have to go to stock art and do all those things. You literally press the magic button. The first venture I ever exited was an animation company and we did stuff online during the first boom. We would joke with clients all the time that we have a unicorn button. When a company would come to us, a client say, "Can you do this? Can you build that for this small budget?" We roll our eyes and say, "Sure, we'll just hit the magic unicorn button. you on our laptop and basically a unicorn, a 3D animated unicorn to top it all off will appear magically before your eyes and do everything that you wanted to. And that was a joke back then because it was impossible. We need budgets. We had to educate clients on that. But now it is possible. And that's what's crazy for me. Just a few words, a few prompts, and bang, you've got a full video that you would have spent tens of thousands of dollars on with all the special effects and all the casting, all the talent that would have gone into it. Now, I'm not talking about the ethics of all that. I'm talking about the user experience and what investors want to invest in. That's what they're fascinated by. And so when Gener AI really took hold plus Vibe coding that had the mind share of everybody and everybody including the people who hired who had employees all the people governing these systems they got creative and started thinking what is the world of opportunity the possibilities that have opened before us. The fabric of reality started tearing before people's eyes. I get it. But that's what attracts the money. And if you can promise an outcome that nobody has ever thought about, maybe something that's underserved, underestimated, and underrepresented, a problem that nobody else is solving, and your outcome is we solve that problem, you are going to get investment whether you talk about AI or not because AI will most likely be incorporated because now AI is opening up those doors to allow us to solve those problems. So go out there and pick a problem and promise an outcome and you will capture the mind share and get funded.
But there's an S tier everyone that builds off the A tier in terms of outcome and mind share and that is the fastest business model will win. The fastest business model built around an outcome that captures with velocity momentum faster than others the mind share of the market will receive most of the money. I would venture to say is going to receive the most important funding that you will receive to pour gasoline on the fire. You're going to get funded not to build something but to scale because you're already moving so fast. Think about it for a moment. Let's say you just start off with a concept. You got it out there. You're demoing it and it started to get some traction. Then you got a feature. You build the one thing that customers want and you're getting more momentum. You're getting lots of validation. And traction is not just revenue, but it's actual validation from the market. That becomes a tool that customers are willing to pay for. Now you're making money. And slowly products start to happen. But the slow part is what bothers investors because if you can go out there and you just start off with a concept and you're moving fast and you build an MVP and it's a feature and it captures everyone's mind share because they are thinking about the outcome that you promise them. Well, if you build a business model on top of that and you capture that, it doesn't matter if other AI companies with deeper pockets all the dry powder in their war chest come along and say, "Hey, guess what? We can build that feature too. Guess what? We just launched a new suite of tools like Box just launched a new suite of tools that can take all your content, all the stuff that you have files of, you're storing it online with Box, they can read it and start making business recommendations, content recommendations, that's a fantastic set of tools. But if you're already entrenched with the companies because you've captured their mind share and you've got a business model that works different than Box, Box is stuck with their business model, their monthly subscriptions and how many users and how many terabytes of information you're storing. If you got a different business model and you're moving fast and you're capturing those customers, you are going to get that investment because those preed and seed investors are going to say, "Yeah, this is contrary to the market, you're standing out. It's a novel, unique insight and you're answering the questions. What's different? Why now? And why you?" And the rest are going to say, "Why not me? Take my money, run with it, and let's compete because the winner is going to take all the spoils."
Let me summarize by saying this. No, investors will not invest for you to build something because building can be slow and it's not validated. Investors want to invest in you scaling. That's a fact. But these are other types of investors. Let's say it gets an A round. That's going to be the cost of entry. You need to absolutely have that as a minimum standard. But for preed and seed investment, if you can move fast, that is your competitive advantage. You will get funded no matter what stage or what tier you are. And that's why it's an S tier. If it leads to a business model that you've got to figure out that's going to make money, they will give you money to go and figure that out. They'll give you money not to build a product, but to build a business model that scales, that wins all the rewards. You will make all the money, not some of the money, all the money. That's what the investors start to think and FOMO and greed start to set in and that works in your favor.
So, how do you build the fastest business model, especially at an MVP stage? Well, lucky you. I created a video just on this alone. Watch this video next. Click on it and I'll break down how you want to get there. The mindset, the framework that you want to be thinking instead of just building a minimum viable product, you're going to be building the fastest business model that gets monetized and that can raise investment faster and better than other funders out there that are doing the traditional MVPs. That's it. Let me know what you think. Love to hear your thoughts. Thanks for hanging out with this video. I'll see you in the next.