Activant's Greene Street Observer No.19

Founders, Partners, and Friends,

As we step into 2026, the evolution of AI in business reminds me of the seismic technology shifts on the battlefields of World War I. The machine gun wasn't just a new weapon; it obliterated the Napoleonic paradigm of warfare, where cavalry thundered across fields, infantry advanced in tight ranks, and battles hinged on bayonet charges. Early in the war, generals clung to these traditions, sending waves of troops and horsemen into the teeth of automatic fire, resulting in staggering casualties. 

It took repeated, brutal failures for the lesson to sink in: the technological leap was so profound that old tactics assured defeat. Survival required a full doctrinal overhaul: digging in with trenches and barbed wire, relying on artillery coordination, creeping barrages, and later innovations like tanks. Those who adapted fastest gained the edge.

Generally business isn’t life or death, but the analogy of corporate survival will hold. AI will reshape the competitive landscape in every industry, with the similar force. Firms sticking to legacy models such as manual scaling, gut-driven decisions, or fragmented tech stacks are vulnerable to being overrun by those who embed AI as the foundation of a modern playbook. This requires more than just tools, it is a doctrinal shift. If this is true, then is the AI hype warranted?

In the corporate battlefield, it isn’t enough to dabble; you must reimagine strategies around agentic systems, predictive analytics, and autonomous decision-making. Early adopters are already seeing the gains: McKinsey's latest AI survey shows organizations with enterprise-wide AI adoption reporting 2.5x higher revenue growth than laggards. But hesitation lingers, much like those WWI generals. Those that delay, fearing integration pains or unproven ROI, will only watch nimbler competitors pull away. 

The WWI analogy should hit hard for any business. As we go a layer deeper into AI technology companies, we are finding consistent attributes among the winners.

1. For those building AI-native companies, success increasingly hinges on going deep in a niche rather than trying to boil the ocean with broad enterprise plays. Dominating a specific vertical such as accounts receivable automation - lets you solve acute pain points creating defensible value in workflows incumbents can't easily replicate. Take Cursor (from Anysphere), which zeroed in on AI-powered coding assistance and hit $100 million in annualized revenue within two years. Examples of niche players winning are numerous. On the other hand, broad enterprise AI is tough sledding with too many stakeholders, compliance hurdles, and customization demands. As the Stanford AI Index 2025 notes, niche applications are driving much of the AI private investments.

2. Being first to market especially in enterprise, amplifies that edge. Launch with something 5x-10x better than the status quo, and you've got a shot at locking in customers before switching costs skyrocket. Switching costs are not just financial, but in re-training a workforce, customized integrations, and team muscle memory. Perhaps second movers scrape together 30% improvements, but that will look partly compared to the switching costs. McKinsey's 2025 State of AI survey shows high performers (those seeing real EBIT impact) are 3x more likely to scale AI enterprise-wide, often by making early, bold bets on the first mover technology.

3. Finally, even AI companies can't afford to skimp on eating their own dogfood. Adopting AI across your own operations is table stakes for staying ahead. Microsoft doubled down by weaving OpenAI tech into everything from Azure to Teams, boosting its AI revenue to $1.1 billion quarterly. As McKinsey reports, 62% of organizations are at least experimenting with AI agents internally. That number should be 100%.

The rest of this decade is shaping up to be a golden era for those who adapt AI - don’t wait, grab the brass ring.

Let’s go! 🚀

Steve Sarracino

Founder & Partner

2025 was a defining year for Activant.

Across the portfolio, we backed category-defining companies through key inflection points—leaning in where conviction was highest, supporting founders through scale, and celebrating meaningful liquidity along the way. From early-stage investments to late-stage growth rounds and landmark exits, the year reflected both discipline and momentum.

What stands out most isn’t the volume of activity, but the quality of execution behind it. Portfolio companies operated through a challenging environment, sharpened unit economics, and continued to scale with focus. Many are at or ahead of plan, with durable revenue growth and improving margins—clear indicators of operational strength across the portfolio.

Equally important, Activant continued to invest in the platform itself—expanding the team, deepening our research and AI capabilities, and strengthening our presence across key geographies. These efforts are designed to better support founders where it matters most: insight, speed, and partnership.

As we enter the new year, our focus remains consistent: backing founders building mission-critical infrastructure, doubling down on our highest-conviction companies, supporting operational excellence and capital efficiency, and maintaining a disciplined, patient, long-term approach.

We’re encouraged by the performance we’re seeing across the portfolio and energized by what’s ahead.

In 2025, Activant brought its global ecosystem together in more ways than ever before—from Genesis, our flagship conference in Munich timed with Oktoberfest, to M2020, where founders, operators, and partners leaned into candid, forward-looking conversations. We hosted intimate Founder Dinners across major cities, connected with the next generation of builders at Slush, and celebrated the opening of our San Francisco office (and if you’re in the area, we’d love to see you).

Across every event, our focus remained the same: cultivating a durable, global network of founders, portfolio leaders, strategic partners, and LPs who are building—and scaling—the future together. We look forward to hosting more meaningful events in 2026!

🤖Artificial Intelligence (AI) & Automation

• AI is Rewriting the Rules of Supply Chain

• Enterprise Search Is Entering a New Era

• Open Source Generative AI

• Voice Agents 2.0

• The Agent Control Plane

🏗️Industry & Vertical Software

• Click. Buy. Drive.

• The Blueprint for a Smarter Future

🔒Cybersecurity & Identity

• The Long Road to Automating the SOC

💭Opinion Pieces: Insights from our research desk

• The AI Pricing Cliff No One Wants To Talk About

• Salesforce's $8B Wake-Up Call: The End of Systems of Record

• Systems of Intelligence: The Replatforming of Enterprise Software

• Accelerating the shift to stablecoins

• The Playbook for Winning in Market Consolidation

• Google's End of &num=100

• AI bubble signals intensifying

• Ideology vs. Infrastructure Reality

Activant is a research-focused global investment firm that partners with high-growth companies, transforming the way the world makes, moves, and sells.

Founded in 2015, Activant has invested in category-defining companies like Deliverr (acq. by Shopify), Hybris (acq. by SAP), Celonis, Sardine, and many more.

The firm has $1.5B assets under management and is headquartered in Darien, Connecticut, with offices in New York City, San Francisco, Berlin, and Cape Town.

The Greene Street Observer is published monthly from Activant’s office on Greene Street in New York City.