Tweet by buccocapital

January 19, 2026

Man the sentiment on software as an investment here is pretty bombed out. Some various thoughts from having spent a couple decades working in software: - This was the easiest market for a long time. Greenfield opportunity everywhere - A few sub-problems flow from this. A) That didn’t exactly nurture what I would describe as “operational rigor.” B) I also wouldn’t describe many of these executive teams as killers C) People are used to operating in an inbound environment with weak competition. Very much not the case today - Similarly, gross margins hid a bunch of lazy, bad habits - And investors have never given a shit about real profit, so that is baked into how these companies operate. - You would think 2022 would have washed a lot of these bad habits away. For some companies, like I would say Shopify is a great example, it absolutely did. For other companies it did for a little, but muscle memory is strong, and times got good again. Some didn’t even really try. So you are going from an environment with a ton of tailwinds, minimal competition, low interest rates, investors who didn’t care about profit, and high gross margins to… Incredibly intense competition, needing to sacrifice margins to compete in AI, knife fights everywhere as tailwinds vanish and operating surfaces converge, higher rate environment, investor concerns on terminal value due to AI disruption risk, and a bunch of other real, structural issues that would make this post way too long to read And almost all these companies aren’t cheap even after this de-rating. And they’re not growing that fast anymore either. And AI native app layer companies are stealing their incremental customer LTV. And the management aren’t really killers because they haven’t had to be. So do I think a lot of the bear cases are extreme? Yes. But is there a lot, a lot of truth here? Also yes.

Author
buccocapital
Date
January 19, 2026
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