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

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

by Greg Head

1h 13m•August 7, 2026
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Overview of #208: How AI Rewrote What Active SaaS Buyers Want in 2026 - Mike Lyon

In this episode of the Practical Founders Podcast, Greg Head talks with Mike Lyon, founder and managing director of Vistapoint Advisors, about how the SaaS M&A market has changed in 2026 for bootstrapped and lightly funded software companies. Lyon explains that buyer behavior has shifted quickly because of AI: retention metrics matter more than ever, system-of-record businesses are favored over point solutions, and buyers want clear defensibility through proprietary data, payments, or an “agentic” future. The conversation also covers how founders should prepare for a sale, what a competitive process looks like, and how to avoid common mistakes that can crush valuation or kill a deal.

What Changed in 2026

AI is reshaping buyer criteria

  • Buyers used to evaluate SaaS companies with a fairly stable rubric: growth, retention, unit economics, and TAM.
  • In 2026, those criteria are changing rapidly, sometimes week to week.
  • The biggest shift is a much stronger focus on gross revenue retention as a proxy for durability in an AI-disrupted market.

Gross retention is now a major signal

  • Buyers want to see roughly 90%+ gross retention.
  • Gross retention matters because it shows how much revenue remains after churn and downgrades, without giving credit for upsells.
  • Lyon says this is partly a stand-in for: “We don’t fully understand AI risk yet, but businesses with high gross retention are probably more resilient.”

System-of-record businesses are favored

  • Buyers now prefer software that is deeply embedded as a system of record.
  • Point solutions are seen as more vulnerable to AI displacement.
  • Businesses with proprietary data, embedded payments, or workflows that can support agents are viewed as more defensible.

Horizontal software looks more vulnerable

  • Lyon believes broad horizontal software is under more permanent pressure from AI.
  • Niche, specialized, vertically oriented software still has strength if the TAM is large enough and the specialization is real.

What Buyers Want Now

Key traits buyers are prioritizing

  • Strong growth
  • High retention, especially gross retention
  • Clear product-market fit
  • Capital efficiency
  • A credible AI story
  • Defensibility through one or more of:
    • proprietary data
    • payments infrastructure
    • system-of-record status
    • ability to support AI agents

Vertical SaaS remains the sweet spot

Vistapoint focuses on businesses in areas like:

  • education
  • corporate training
  • compliance
  • real estate

These businesses tend to:

  • raise less capital
  • have better product-market fit
  • be less exposed to hyper-competitive VC-backed growth dynamics
  • fit well with private equity buyers who can help scale sales and marketing

Buyers are more cautious in 2026

  • Fewer first-round bids than in prior years
  • Fewer buyers make it to the finish line
  • More “reasons not to close” are surfacing during diligence
  • Buyers are more hesitant to spend heavily on diligence unless they are truly serious

How the M&A Process Works

1) Data cleanup comes first

  • Vistapoint typically spends 50 to 100 hours cleaning up the data before launching a process.
  • Founders often think their data is “clean,” but buyers care about different things:
    • GAAP-style metrics
    • retention by cohort
    • revenue by customer
    • concentration risk
  • Raw data handed directly to buyers can lead to valuation damage.

2) Launch the process

Typical steps include:

  • no-names teaser
  • NDA collection
  • sharing marketing materials
  • management calls
  • first-round bids

3) Narrow to serious buyers

  • Initial bids are used to eliminate weak bidders, not pick the winner.
  • The goal is to get down to roughly 4–6 serious buyers.
  • Serious buyers are the ones spending real money on:
    • legal
    • tax
    • accounting
    • technical diligence
    • market diligence

4) Use diligence spending as a signal

  • Lyon stresses that what buyers do matters more than what they say.
  • If a buyer spends heavily on diligence, that is a strong signal of seriousness.
  • A marked-up purchase agreement during the competitive process is especially powerful.

5) Avoid giving away exclusivity too early

  • Exclusivity is “the negotiation behind the negotiation.”
  • Once a buyer has exclusivity, they have more power and often slow the process down.
  • Buyers’ LOIs are not commitments in the way founders often think; they are closer to an option.

Common Founder Mistakes

Overestimating inbound interest

  • Many founders assume lots of inbound calls means lots of real buyer demand.
  • Lyon warns that many of those buyers are just fishing for information.
  • A credible bid requires actual diligence and market understanding.

Giving exclusivity before market diligence is done

  • This is one of the biggest mistakes.
  • Market diligence should be done before exclusivity, especially for private equity buyers.
  • If a buyer discovers later that the TAM is smaller than expected, that’s avoidable and can kill the deal.

Hiding bad news too long

  • Founders should disclose potential issues to their banker early.
  • Not everything needs to go into the teaser, but bad surprises should be surfaced before a buyer gets too deep.
  • Late-discovered issues can destroy trust, especially with public-company strategics.

Thinking every LOI is a done deal

  • Founders often believe “I signed, so we’re closing.”
  • In reality, buyers still have significant flexibility after LOI.
  • Due diligence can still change the outcome materially.

Founder Role, Rollover Equity, and Deal Structure

Sellers should think in terms of liquidity, control, and upside

Lyon frames founder decisions around three main factors:

  • Liquidity: how much cash you take off the table now
  • Control: how much influence you keep
  • Upside: how much future value remains

There is no one-size-fits-all buyer type

Different buyers offer different tradeoffs:

  • Strategics often provide the cleanest full exit
  • Private equity may offer partial liquidity plus future upside
  • Some PE firms want the founder to stay
  • Others expect the founder to leave and install a professional CEO

Founders should be open to staying on

  • A common expectation is 6–12 months after close, with flexibility to stay longer if things are going well.
  • Some founders underestimate how valuable their continued involvement can be.
  • But if the deal is priced very aggressively, the pressure on day one is also much higher.

Rollover equity is often undervalued by founders

  • Lyon says many founders do not fully appreciate the value of retaining equity in a recap or majority sale.
  • In strong deals, the second bite can be very meaningful.
  • Many founders can do well both on the initial liquidity event and the rollover equity.

Tactical Advice for Practical Founders

Improve the metrics buyers care about

Focus on:

  • gross retention
  • logo retention
  • customer concentration
  • revenue quality
  • gross margin
  • proof of product-market fit

Clean up the customer mix

  • Small, low-usage customers often hurt retention metrics.
  • Vistapoint often helps founders isolate the best-performing 80% of revenue and tell a cleaner growth story.
  • In many cases, the smaller accounts are also less profitable than founders realize.

Know when to wait

  • Some valuation jumps are linear.
  • Others are nonlinear: crossing a revenue threshold, improving concentration, or cleaning up retention can materially increase multiple.
  • Lyon emphasizes that sometimes waiting 6–12 months can unlock a much better outcome.

Be honest about why you want to sell

  • In practice, founders usually sell because of personal reasons, not because of perfect market timing.
  • Common triggers:
    • company complexity
    • increased HR burden
    • burnout
    • desire to de-risk
    • loss of interest in scaling certain functions

Use benchmarking before going to market

Vistapoint will often help founders understand:

  • what their business is worth now
  • what will matter most in 12 months
  • what is a deal-killer vs. a fixable issue
  • how to improve valuation before launching a process

Bottom Line

Mike Lyon’s main message is that the SaaS M&A market in 2026 is still active, but more selective and more AI-sensitive than before. Buyers now want businesses that are clearly resilient, sticky, data-rich, and strategically defensible. For practical founders, the best outcomes come from preparing early, cleaning up the data, understanding which buyers are real, and running a competitive process instead of taking the first inbound offer.