Where Bonfire Is Looking for AI-Era Winners

My partner Brett Queener recently published an excellent piece on how the transition from SaaS to the AI era has fundamentally reshaped software defensibility. This is my version of that thesis, and how it is guiding Bonfire’s investment focus.

Software code is becoming commoditized, and single-player, task-oriented tools are increasingly vulnerable to updates from frontier models. Long-term value creation belongs to companies that build an operational "compounding loop", where user traces continuously feed an underlying software harness, deepening a proprietary judgment layer that improves with every deployment.

Therefore, before evaluating specific categories, we apply a universal filter at the Seed stage, and every Bonfire investment must clear five core gates:

1. Multiplayer Architecture: Solving multi-stakeholder workflows with deep domain logic, rather than single-player tasks.
2. Compounding Value: Ensuring the 500th customer makes it measurably better for the 1st.
3. Model Tailwind: Designing the product so that when a better foundation model drops, it helps the business rather than hurting it.
4. Deflation Resilience: Ensuring the company wins even if the customer's willingness-to-pay drops by 50% as intelligence costs deflate.
5. Existential Buying Power: Selling tools that customers buy out of an absolute, indispensable need to master AI-native workflows.

Bonfire is actively deploying its new $245M Fund IV into SIX areas of investment focus in the application and infrastructure layers where domain expertise and go-to-market instinct drive the compounding loop.

1. Vertical AI Software: Capitalizing on the collapsed cost of software development to serve deep, complex verticals previously ignored by SaaS. These products go beyond simple "AI features" to offer agentic, full-stack solutions that run the business on behalf of the owner. Bonfire Portfolio Fit: Supio - An agentic solution for personal injury and mass tort law that integrates practice data and case information, functioning as a hyper-intelligent agent with full business context.

2. AI + Proprietary Data: Investing in structurally exclusive datasets generated by actual operations (not Internet scraping) that create cross-node network effects across entire supply chains. Portfolio Fit: Rwazi — Tracks zero-party consumer and retail data across 160+ emerging markets via a network of 3 million consumers. Its AI engine, Sena, creates a shared data fabric for Fortune 500 CPG brands.

3. Services-to-Software: Unlocking the $5T+ services market at 75%+ software margins by using AI to handle bulk tasks while humans manage edge-case exceptions. Portfolio Fit: Juno Tax - Automates 90% of manual tax document data entry, cutting preparation time from hours to minutes while capturing expert CPA behavioral signals to deepen its moat.

4. Fintech Hard Rails & Deterministic Infrastructure: Providing exact, deterministic guarantees (payments, compliance, identity) in a probabilistic AI world. TAM expands automatically as autonomous agent transactions increase economy-wide. Portfolio Fit: Straddle - Rebuilding bank-to-bank transfers (ACH, RTP, FedNow) into a single, programmable API with built-in KYB/AML identity layers to support autonomous machine-speed transactions.

5. Agent-Native Infrastructure: The highly selective picks-and-shovels layer (identity, routing, trust, data) engineered exclusively for the new primitives of an agentic world. Portfolio Fit: Orbifold AI - Generates sub-5mm pose-accurate training data for physical AI and robotics, serving top-tier AI labs (DeepMind, NVIDIA, World Labs) that buy rather than build.

6. Structural Reshaping: Non-consensus, high-conviction allocations in companies utilizing AI to eliminate legacy roles, eliminate industry middleware, and alter macroeconomic value chains. Portfolio Fit: CMS.ai - Building the brand registry and infrastructure layer that allows B2B brands to be safely discovered, verified, and trusted by buying AI agents.

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The Founders We Back at Bonfire

At the end of the day, the execution team is the ultimate differentiator, and we have a non-negotiable requirement that founders must be builders themselves.

We back builder-founders who live inside AI tools, ship their own code, and run their startups on AI agents rather than traditional, bloated headcount models.

Beyond builder DNA, we back leaders possessing:

1. An almost pathological drive to win.
2. High mental plasticity to thrive amidst rapid platform shifts.
3. Innate customer magic to personally sell and close the first 20+ enterprise deals.
4. The appetite to pass on good opportunities to chase category-dominating wins.
5. Deep, un-automatable industry domain depth.

The velocity of the compounding loop is separating winners from losers in real time. Bonfire is built to partner with elite founders who are driving that loop to reshape the future of enterprise software.

For Brett’s full take on where durable value gets built in the AI era, read the full article on his Substack here.