Shelley Perry Let’s say this plainly:
If you’re not AI-native, AI-native alternatives in your space are already pressuring your valuation.
Not because customers have all moved.
Because investors are pricing the risk now.
In ScaleUp and Growth Equity underwriting, this is showing up as:
- lower multiples
- more diligence
- tougher questions about defensibility and durability
- skepticism toward “we’ll add AI” roadmaps
And in some categories, it shows up as no interest at all—because the risk feels not underwriteable.
Category risk first: investors discount the space before they pick winners
Investors start with the macro question:
“Is this category likely to be commoditized by AI-native workflows?”
If the answer is “maybe,” they reduce what they’re willing to pay for everyone in the category. That’s the category discount.
This is why two companies with similar revenue can get very different outcomes in fundraising or M&A.
Then company risk: do you deserve a better multiple than the category average?
Once the category is discounted, the next question becomes:
“Why is this company not replaceable?”
The AI-native competitor doesn’t need to match your features.
They just need to reduce steps, bundle your value into an existing platform, or deliver “good enough” outcomes cheaper.
So you earn a stronger valuation when you can prove you’re becoming AI-defensible.
What “AI-defensible” actually means
AI-defensible isn’t “we use AI.” That’s table stakes.
AI-defensible means your value holds up as AI-native alternatives emerge.
Investors can underwrite that when you have one or more of these:
1) Embedded in workflow
You’re part of how work gets done. Removing you is painful.
2) Real switching costs
Integrations, data gravity, process dependency. Not vibes.
3) Owned distribution
You don’t rent demand from a channel an AI layer can route around.
4) A compounding trust/data advantage
You have proprietary signals, verification, outcomes, or quality that improves at scale.
5) Proof of durability + pricing power
Retention and expansion are real, and you can maintain price (or increase it) without churn spikes.
Why this framework changes M&A target selection
In 2026, you’re not just buying revenue.
You’re buying:
- the target’s exposure to category discount, and
- their ability to help you become AI-defensible
So the board-level question becomes:
“Does this acquisition reduce AI uncertainty—or does it add more non-native surface area?”
Buying “more of you” can be fine.
But if it doesn’t increase defensibility, it may scale the very risk investors are discounting.
A fast test for ScaleUp M&A and Growth Equity discussions
A deal is more likely to support a higher valuation if it makes you:
- more embedded
- harder to replace
- less channel-dependent
- more trust/data advantaged
- clearer in your AI-native trajectory
If it doesn’t do any of those, treat it as revenue growth—useful, but not guaranteed to increase enterprise value.
Bottom line
In 2026, AI is a valuation conversation.
If you’re not AI-native, you need to become AI-defensible before you plan a major funding round or exit.
Because investors are repricing categories first—and they’re not paying premiums for companies they can’t confidently underwrite.
