The Great B2B Bifurcation: Why 'Must-Have' Startups Are Thriving and 'Nice-to-Have' Startups Are Getting Crushed

The Split That Just Showed Up in the Stock Market, and What It Really Measures

SaaStr's read on 2025 B2B SaaS performance is blunt: the market is rewarding companies whose software customers literally cannot live without. Security, data infrastructure, compliance, healthcare, defense. Meanwhile, software that customers merely find useful, the category SaaStr calls 'nice to have,' is getting crushed.

That framing matters because it's not describing product quality. Plenty of 'nice-to-have' vendors have excellent products, high NPS scores, and happy users. The distinction isn't whether customers like you. It's whether they can operate without you.

Public markets are a lagging indicator of something private B2B founders have been feeling for a year: buyers have gotten ruthless about what earns a renewal versus what gets reviewed. SaaStr also notes that SMB SaaS is structurally harder right now, because SMB buyers are price-sensitive, AI-curious, and have low switching costs. Enterprise and government buyers take longer to close, but they're stickier and far less vulnerable to AI-driven commoditization.

That second point is the one most Israeli founders selling into enterprise skip past. They have the harder-to-displace customer base by default. Then they build a GTM motion, a pitch deck, and a pricing model that behaves like they're selling to SMBs anyway.

Must-Have vs. Nice-to-Have Isn't a Feature Question, It's a Positioning Question

Here's the part founders get backwards. They think 'must-have' is a property of the product: enough features, enough integrations, enough AI, and eventually the market decides you're essential. That's not how it works.

Must-have is a property of how the buying committee describes what happens if you disappear. If the honest answer is 'we'd find a workaround in a quarter,' you're nice-to-have, regardless of how good your product is. If the honest answer is 'we'd have a compliance gap, a security exposure, or a broken pipeline,' you're must-have, even if your product has real rough edges.

This is a positioning exercise, not a product roadmap exercise. I've sat in enough sales calls to watch the same product get pitched two completely different ways depending on the rep, the deck, or the mood of the week. When that happens, the company hasn't decided what it is. And if the company hasn't decided, the buyer decides for them, usually by defaulting to the cheapest read: 'nice tool.'

The uncomfortable truth is that most B2B startups can move themselves from nice-to-have to must-have without touching the codebase. It requires reframing what the product prevents, not what it enables. Prevention language (risk, exposure, compliance, continuity) reads as infrastructure. Enablement language (efficiency, productivity, insights) reads as a nice-to-have, no matter how sophisticated the underlying tech is.

Why Israeli Startups Have the Enterprise Advantage, and Waste It

Israeli B2B tech has a structural advantage that most founders don't fully use: the products are usually deep, technical, and built for complex environments, which is exactly the profile that maps to must-have categories: security, infrastructure, fintech backend, defense-adjacent, data platforms.

That's the natural terrain SaaStr describes as stickier and less commoditizable. It's also the terrain where enterprise buyers move slower but churn less. Yet I keep seeing the same pattern at Seed through Series B: the product is enterprise-grade, and the marketing is SMB-grade.

The messaging talks about ease of use instead of risk reduction. The pricing page looks like a self-serve SaaS tool instead of a procurement conversation. The homepage leads with a feature list instead of the specific operational failure the product prevents. The sales deck changes every week because nobody has decided whether this is infrastructure or a nice-to-have productivity tool, so every rep decides for themselves.

The result is a company with must-have technology, marketed like a nice-to-have, and squeezed accordingly. It's not an AI problem. It's not a demand gen problem. It's a category decision the founding team never made out loud.

AI Doesn't Close the Gap, It Widens It: Retention Compounds, Acquisition Doesn't

Here's why the timing on this matters right now. According to HubSpot for Startups' GTM report, 37% of venture-backed founders say AI has lowered their customer acquisition cost. But 72% say AI has improved their ability to upsell and cross-sell existing customers. That's a wide gap, and it favors whoever already has the customer.

Read that again in the context of must-have versus nice-to-have. AI is making it easier to deepen a relationship with a customer who already depends on you. It's not doing nearly as much to help a nice-to-have vendor win a new logo, because the acquisition problem for a replaceable product was never really about efficiency. It was about differentiation, and AI doesn't manufacture differentiation. It just executes faster on whatever positioning already exists.

So must-have vendors get a compounding advantage: AI helps them extract more value from the accounts that can't leave. Nice-to-have vendors get a marginal acquisition boost that doesn't offset a fundamentally weaker retention story.

There's a second HubSpot data point that reinforces this. Sixty-nine percent of founders now have a dedicated AI specialist or team on GTM. Yet according to Gartner's 2025 CMO Spend Survey, marketing budgets industry-wide remain flat at 7.7% of company revenue. Founders are investing in AI tooling without any corresponding increase in budget or, more importantly, any resolution of category clarity. They're getting faster at the wrong motion. That's the AI budget illusion in a single stat: more tooling, same confusion, just delivered quicker.

The Diagnostic: Are You Actually Must-Have, or Just Well-Liked?

Before prescribing a fix, it's worth running an honest diagnostic. I use versions of these questions in early positioning work with founders, and the answers are usually more revealing than any win/loss report.

Ask these about your own product, and be specific, not aspirational:

• If we disappeared tomorrow, what breaks for the customer in the next 30 days? Vague answers ('they'd miss the insights') signal nice-to-have. Specific operational failures ('their compliance reporting stops, their pipeline breaks, their exposure goes undetected') signal must-have.

• When customers negotiate renewal, do they threaten to leave, or do they threaten to downgrade? Downgrade threats mean you're a line item. Leave threats mean you're infrastructure, and they're bluffing more than they'll admit.

• Does your sales team explain the product the same way every time, in under two minutes? If the pitch changes meeting to meeting, that's not a sales training gap. That's a positioning decision nobody made.

• Is your pricing tied to risk or seats? Risk-based and outcome-based pricing tends to correlate with must-have positioning. Per-seat pricing, on its own, often signals a tool, not infrastructure, regardless of what the product actually does.

• Would your buyer's boss recognize your category name, or only your logo? Must-have vendors get referred to by category ('our security layer,' 'our compliance system'). Nice-to-have vendors get referred to by brand name, which is a sign they haven't earned a category yet.

What to Fix Before Your Next Funding Round or Renewal Cycle

If the diagnostic puts you closer to nice-to-have than you'd like, the fix isn't more AI tooling, more demand gen spend, or a faster sales cycle. Those all make a mispositioned company move faster in the wrong direction.

Start with the category claim. Decide, explicitly and in writing, what operational failure your product prevents, not what productivity gain it enables. Write it down before the next board deck, not after.

Then audit every buyer-facing asset against that claim: website, deck, pricing page, first sales call script. If even one of these still leads with features or ease of use instead of risk or continuity, that asset is quietly telling buyers you're optional.

Then look at pricing. If you're priced like a tool (per seat, low ACV, self-serve), you're training the market to treat you like one, regardless of what your product actually does under the hood. Enterprise-grade products deserve enterprise-grade pricing conversations.

This work takes weeks, not quarters, if it's done directly with the founder and the head of sales in the room, not delegated to a mid-level marketer trying to guess at strategy. The stock market data is a lagging signal. The renewal conversation you're about to have is the leading one. Fix the category claim before that call, not after you've lost the deal and are trying to figure out why.