The new generation of AI automates workflows, acting as "teammates" for employees. This creates entirely new, greenfield markets focused on productivity gains for every individual, representing a TAM potentially 10x larger than the previous SaaS era, which focused on replacing existing systems of record.

The explosive growth of AI applications like ElevenLabs is driven by a step-function change in value. They replace processes that cost thousands of dollars and weeks of time with a solution that costs $30 and takes 10 minutes. This massive ROI compression makes adoption a no-brainer for customers.

Focusing on AI for cost savings yields incremental gains. The transformative value comes from rethinking entire workflows to drive top-line growth. This is achieved by either delivering a service much faster or by expanding a high-touch service to a vastly larger audience ("do more").

The massive TAM expansion for AI relies on shifting spend from labor to technology budgets. This shift won't happen because of top-down CIO mandates. It must be driven by bottom-up product pull, where the value proposition is so overwhelmingly clear that customers are compelled to adopt it.

The true market opportunity for AI is not merely replacing existing software but automating human labor. This reframes the total addressable market (TAM) from the ~$400 billion global software industry to the $13 trillion US-only labor market, representing a thirty-fold increase in potential value.

Adding a chat interface or minor "AI features" won't unlock new budget. To capture significant AI spend, your product must either replace human headcount, make users dramatically more effective, or provide an order-of-magnitude productivity increase.

For venture capitalists investing in AI, the primary success indicator is massive Total Addressable Market (TAM) expansion. Traditional concerns like entry price become secondary when a company is fundamentally redefining its market size. Without this expansion, the investment is not worthwhile in the current AI landscape.

Companies like Amazon (from books to cloud) and Intuitive Surgical (from one specific surgery to many) became massive winners by creating new markets, not just conquering existing ones. Investors should prioritize businesses with the innovative capacity to expand their TAM, as initial market sizes are often misleadingly small.

The traditional SaaS growth metric for top companies—reaching $1M, $3M, then $10M in annual recurring revenue—is outdated. For today's top-decile AI-native startups, the new expectation is an accelerated path of $1M, $10M, then $50M, reflecting the dramatically faster adoption cycles and larger market opportunities.