---
title: "Productivity One Year from Now"
description: "Explore how AI will reshape startup productivity metrics, from $400k ARR per employee today to potential $1M, and its impact on SaaS company valuations."
categories: ["data analysis"]
keywords: ["Theory Ventures","Tomasz Tunguz","startup productivity","SaaS company valuations","AI impact on business","ARR per employee","venture capital","data analysis","automation in software engineering"]
ai_summary: "Explore how AI could elevate startup productivity metrics and SaaS valuations, predicting a rise in ARR per employee to $1M."
date: 2024-10-28
lastmod: 2026-07-23
canonical_url: https://www.tomtunguz.com/if-ai-keep-accelerating-impact-business/
author: "Tomasz Tunguz"
---

If AI continues on its current trajectory or accelerates, what will change in your business? 

![Elo Scores for AI](https://res.cloudinary.com/dzawgnnlr/image/upload/wdq1mlsykpu4yjhdrptr.png)

We've been asking leaders of companies & departments this question & the answers aren't clear. 

In a few years, consensus agrees that rote work of BDRs & paralegals & software engineering will be somewhat to mostly automated. But determining the timing of that impact is much more difficult : it depends on the accuracy of the AI.

Calculating headcount changes is more difficult. Sudden headcount reductions or team restructuring are unlikely. Instead, teams will hire fewer people over time but generate more revenue per employee.

Most public companies operate at between $100-400k in [ARR per employee.](https://tomtunguz.com/revenue-per-employee-2023/)

![ARR per employee](https://res.cloudinary.com/dzawgnnlr/image/upload/ycadtrrwnellfrpqll7n.png)

What will that number be in 2 years? 500k? 600k? 1m?

Today, publicly traded software companies operate on average unprofitably with -9.3% net income margin, but 16.2% Cash Flow Margin.

| Metric | Net Income Margin, % | Cash Flow Margin, % | 
| --- | ---: | ---:| 
| Average | -9.3% | 16.2% | 

As multiples in the public markets have compressed in the last 2 years, but AI publics trade at a 100% premium, it may be because the market is pricing in these efficiencies, implying revenue from AI companies will be twice as valuable because they will generate twice as much in earnings. <sup>1</sup>


![image](https://res.cloudinary.com/dzawgnnlr/image/upload/deuqjk9ozvl9iwpvm9er.png)


---
<sup>1</sup>This assumes that investors value software companies on future ability to generate earnings.