SaaS is dead in the age of AI, say many in healthcare software.

Not so fast, says Noah Lewis, managing partner at Ardan Equity, a sector specialist at the intersection of healthcare, life sciences and technology. Arguing that the “SaaSpocalypse” is overblown, he joins McGuireWoods partner and host Geoff Cockrell to discuss AI’s impact on health tech. Noah explains how he screens for “melting ice cube risk” and sees commercialization, not technology cost, as the real competitive moat.

He also unpacks why healthcare’s aging $400 billion tech stack makes the present a golden age for health tech, and contends the market is shifting from inflationary to deflationary business models. It leads to one question: Who wins and loses as AI transforms healthcare?

Connect and Learn More

☑️ Noah Lewis | LinkedIn

☑️ Ardan Equity | LinkedIn | X

☑️ Geoff Cockrell | LinkedIn

☑️ McGuireWoods | LinkedIn | Facebook | Instagram | X

☑️ Subscribe Apple Podcasts | Spotify | Amazon Music

This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

PITCHBOOK TOP 5 RANKING IS FROM THE PITCHBOOK Q2 2025 HEALTHTECH VC TRENDS REPORT AS OF JUNE 30, 2025. THIS RANKING COVERS THE PERIOD BETWEEN 2019 – Q2 2025. ARDAN WAS RANKED #2 IN THE TOP PE INVESTORS IN HEALTHTECH COMPANIES SINCE 2019 BY DEAL COUNT AS OF JUNE 30, 2025, PER PITCHBOOK INFORMATION. WE DID NOT PROVIDE PITCHBOOK COMPENSATION FOR THIS RANKING.

This is The Corner Series, a McGuireWoods series exploring business and legal issues prevalent in today's private equity industry. Tune in with McGuireWoods partner, Geoff Cockrell, as he and specialists share real-world insight to help enhance your knowledge.

Thank you for joining another episode of The Corner Series. I'm your host, Geoff Cockrell, a partner at McGuireWoods. Here at The Corner Series, we try to bring together deal makers and thought leaders at the intersection of healthcare and private equity. Today, I'm joined by my longtime friend, Noah Lewis. Noah is the managing partner at Ardan Equities, technology investor, and we're going to be exploring some of the risks and opportunities that AI presents. But, Noah, if you could kind of introduce yourself and Ardan a little bit before we get started.

Sure, Geoff. Well, thanks for having me. Great to be together today, and congrats on all the success for both you, your firm, and this podcast, of course. As you mentioned, Noah, managing partner with Ardan Equity. Ardan is a middle market buyout manager focused exclusively as a sector specialist at the intersection of healthcare and life sciences and technology.

So Ardan, by nature, invests in software, AI, and data platforms across the broader US market, and we're one of the most active investors in that category. We've been top 10 every year since inception, last year number two in the world. And key to what we do is we're very operationally intensive. Ardan's calling card, if you will, is we're a team of former operators, and so our team have founded 24 health tech and pharma tech companies, and we utilize that founder operational DNA, if you will, to grow great companies.

So, Noah, a lot has been said about AI eating software, that SaaS is dead. As an investor in the space, in general, how do you conceptually think about the impact of AI on the companies that you invest in or have invested in or might invest in? How do you think about that from a 30,000-foot level?

Yeah, it's a great question, Geoff. And we get that question from really all stakeholders across the overall continuum that Ardan speaks with, limited partners, founders, management team members, people everywhere across the spectrum. And our view is that net-net, SaaSpocalypse is a bit overblown. AI is today's disruption across the technology market. But naturally, every decade or so, there's been similar disruptions that the market by and large has absorbed.

And so our view at the 30,000-foot level is that AI is a key enabling technology in general, and it's a moat-shifting event across most every market, technology and non-technology. And so key from our perspective as we think about doing an overall impact assessment is understanding winners, losers, and overall changes to the market, if you will.

How would you describe some of the characteristics that as you're trying to evaluate a particular sub-sector, let's say, as a winner or loser, what are some of the characteristics that put a business at risk? And how would an investor like Ardan capitalize on those vulnerabilities?

First off, as a sector specialist in healthcare life sciences tech, how we look at it is perhaps different from how other sector specialists or generalists might look at their respective industry sectors or coverage universes. So within our world of healthcare and life sciences, naturally quite a bit more insulated from new emerging technology challengers in general. Healthcare technology tends to be a bit of a laggard in terms of adoption of newer technology. And so what we're seeing first in broader strokes is faster adoption in other sectors in general, whether financial services, et cetera, that are further along in the modernization of their overall tech stack.

As we think about doing an impact analysis within our focus sector, the way we think about it is, what's your business model to begin with? Are you a services company? Are you a software company? Are you a data platform? Or are you a hybrid of one or all of those three? And in general, as you think about AI and the agentification of business models, companies, and their offerings, the way that we ultimately think about it is, can you adapt in an AI world to incorporate AI capabilities, tool sets, and functionality within your current offering in a way that benefits customers, creates operational efficiency, and ideally comes into the product stacked in the front office? And from our perspective, we have a 64-point analysis that we use to actually analyze companies and come up with basically the good guys, the bad guys, and the net neutral.

And good guys, bad guys, net neutral, are you looking for the good guys, which I assume means some insulation from the risk of AI, or are you looking for bad guys in the sense of vulnerable to AI and then becoming the source of that vulnerability to pursue market that they have?

It's a great question, Geoff, and I think a lot of it's peeling the onion. So first off, how do you retire risks around a company? And to retire risks around a company, first you're trying to assess defensibility of their competitive moats and their value proposition. Is what the company does lasting mission-critical for the customer, or is it more so arbitrage in an administrative task or function that should be automated but hasn't yet been automated?

And so in short, we're always first trying to identify "melting ice cube" risk. And that, of course, predated AI, but "melting ice cube" risk is only accelerating in the world of AI. And so we start with first identifying retiring "melting ice cube" risk, and we then move on to basically, from a technology stack perspective, what's the nature of the overall company's business? Where are they in their modernization journey? Are they monolithic, old school technology platforms, or are they more purpose-built, cloud-built, modular in nature where they can more readily adapt and adopt AI?

Maybe focusing a little bit on services, and in this context, I mean services not in the sense of the providers doing actual kind of hands-on medical services, but that of services to the healthcare industry, what are some of the characteristics in that universe that create the "melting ice cube" dynamic?

Prescient question, and our view on that is the health IT market is about $400 billion growing 15%, and there's a multi-decade existing market for administrative services. In most cases, maybe on a good day, lightly tech-enabled, but largely, whether onshore or offshore, these are administrative professionalized services doing outsourced administrative tasks. The non-clinical side of healthcare, that's roughly an eight-to-one labor ratio for the overall US healthcare market. And so this market, in our view, has really been stubborn in resisting automation. Today's software and data platforms have automated a significant amount rather of the tasks within healthcare and life sciences, but where technology starts with automation in a pre-AI world has been the higher volume, more standardizable functions within healthcare and life sciences.

Now, as everyone knows that operates within our focus sector, there's a real long tail of smaller quantity, more complex administrative and financial tasks that have been resistant to automation. AI is changing this. Historically, software had to be designed to address bigger problems, more volume. It was difficult to have more agile, dynamic technology solutions to address lower quantity, more complex tasks that might change in nature. And so this has really been where the multi-hundred billion dollar administrative services market has persisted, and it's perfectly suited as a bullseye for what AI and AI-enabled software can readily automate.

And so from our perspective, while difficult to handicap the timing of this, our view is that increasingly the healthcare and life sciences administrative and outsourced services market will increasingly be cannibalized into the health IT market. And it's probably not on a one-for-one basis, Geoff, meaning a dollar of services spend is probably not a dollar of tech spend, but think of it as a 60/40 where there's basically devaluation and deflationary effects on the spend, but it moves into the technology market while overall decreasing that services spend.

This evolving technology market, is it dominated by large players? Or as you're looking at companies to invest in, is it the small and mid-size one that show the most promise? What does the dynamic look like there?

And, Geoff, do you mean from the services perspective or the tech companies that might be automated?

The tech. The tech.

Well, it's an interesting phenomenon within healthcare and life sciences where it's a pretty fragmented market still. And so there's legion of quantities of smaller and mid-sized companies focused on myriad niches, if you will, across healthcare and life sciences. That's true both in services as well as more on the technology side. And so we anticipate increasing consolidation among those smaller and mid-size vendors. And in fact, that's largely part of our strategy where we consolidate complementary capabilities, create platforms that delight customers, and truly bring together industrial logic.

Do those businesses... I mean, you can kind of grow through M&A consolidation. How vulnerable, once you're established in that, are you to kind of upstream technology companies? Is there eventually going to come a day when native Claude can just do all of those functions?

Yeah, it's the big question, right? Will Anthropic take over healthcare, you know? Or will OpenAI run pharma? Our view is a bit nuanced, and a lot of this is informed by multiple decades only operating in this sector. And you could call us jaded or perhaps informed, Geoff, but we like to think, having lived through every single era of technology disruption, in many cases, our team have actually been the disruptors with 24 founded companies. Our view is that today in healthcare and life sciences, the barrier to entry is not really the cost of technology development. If we are in a consumer-app-focused world, travel reservations, consumer-to-consumer interactions where cost of building and launching an app is low, where barriers to entry and switching are also low, we'd be much more concerned about the emergence of AI-native companies.

But in life sciences and healthcare tech, the real competitive moat tends to be commercialization. AI, of course, is driving a lot of great innovation, which we love to see because that's the top of the funnel for our strategy. That said, there's no shortage of innovative startups in the healthcare tech and in pharma tech, and there have been for at least 15, 20 years, and that's only been increasing. And so there's huge innovation already in the market.

Now, those smaller innovative companies are being joined by AI-native challengers, but there's a 10-year, 15-year journey of commercialization through regulatory grade quality, customer adoption, proofs of concept. And so it's really that crossing the chasm moment of commercialization that tends to be the barrier. Our view is that platforms can then pick and choose and buy from the more innovative companies through add-on acquisitions.

This moment that we find ourselves in as an investor, and it may be a little bit of both of these, but would you characterize this as a generational moment for investment and you need to be fast or this is a generational moment for investing in the reverse that you must, must, must be careful? Which of those sound most true?

It depends who you are. And so we actually see both playing out in real time. And so in our view, this is where sector specialization really matters. I'd say you're seeing generalists or services investors who occasionally tour into health tech, for instance, far more challenged and struggling given the emergence of AI because they aren't familiar with how this plays out. And so they tend to be more risk off, but really due to just lack a sector expertise.

Our perspective is that this is, on a forward basis, the golden age of further digitization and growth of health tech, pharma tech. And in a choppy market like this, with measured approach and always a view to downside protection, our firm in Ardan is very bullish on the next couple decades. Because in general, healthcare pharma — it's one of the biggest laggards in modernizing its existing $400 billion tech stack. It's still running on 1990s, early 2000s monolithic or even homegrown software, and there's a multi-decade modernization journey in front of us. AI will accelerate that journey from old to new, from services to technology. And so all in all, we see it as a significant tailwind to our strategy, and we're certainly buyers in this market going forward.

There are all sorts of investors, some of them very sector specific, some of them a little bit more generalist. As a plug for Ardan, what's the benefit of being a specialist at this moment?

Well, if we're giving plugs, I first have to plug Geoff and your firm, because you guys actually helped launch us in our first year of existence. And, Geoff, credit to you being on the innovative side of helping young managers get off the ground. We really appreciated what you and your firm help us do. And fast-forward now almost a decade, and it's a fun place to be in.

On the question of sector specialization, when we talk with limited partners and when we talk with founding CEOs and management team members, what we hear consistently... And in fact, my co-founder Michael and I, what we heard for years was a real desire for very deep, true operating DNA and industry-specific knowledge, expertise, and value-creation capabilities. That's ultimately what led us to launch Ardan.

Now, to be clear, since we first launched the firm, there's been an emergence of other sector specialists covering our universe. And we always expected some copycats, but our perspective is that sector specialization isn't just focusing on one sector, but it's bringing to bear significantly deep expertise that's decades in the making. It's deeply embedded within the personnel. And our view is that the sector specialization strategy consistently outcompetes generalists, but it also avoids risks. And so it's about driving higher returns, risk adjusted. As you think about what are the potential benefits, our perspective is better pattern recognition, greater visibility into deal flow and sourcing through consistent focus, and ultimately understanding how to assess risks and value in a way that others can't.

I'll give you an example. In health tech, pharma tech, one thing we see a lot of, and you saw a lot in '21, '22, '23, was the tourists in our market, generalists, healthcare services guys, even software generalists unfamiliar with health tech, a lot of people overpaid for assets because they ultimately miscalculated and misassessed in terms of what the underlying business model product set was of the companies they were investing in, for instance, applying more of a SaaS multiple to a tech-enabled services business. And so you saw aggregation in the mean from evaluation and multiple perspective for assets that just didn't merit it. And so from our perspective, several different benefits, but that's just hitting on a few.

When I get a chance to talk to people that are closely connected to the AI evolution revolution, it's always interesting to hear if they've got some visibility into truly transformational things that are happening. As you're out there talking to people or probably things that have not fully arrived yet, but as AI transforms in this industry, what do you see on the horizon that'll be dramatically transformational? Whether that is drug development, what things are about to become reality?

It's been said that AI commoditizes intelligence, which is a pretty bold, provocative statement. And I'm not sure we entirely agree with that. But from our perspective, we would probably defer to the futurists of the world to try and predict ultimately what happens in a decade or two.

Key to our strategy is we're very pragmatic. One of the biggest challenges in health tech is typically most forecasts, predictions, strategies around disruption tend to be both incorrect in overall magnitude as well as timing in particular. There's a trail of tears of venture capitalists and growth equity guys who have predicted their companies will disrupt healthcare, and there's a very small end of companies that ultimately do.

Our view is that to drive impact, both financial, operational, and clinical in healthcare and pharma tech, it's really about scale in innovation and innovation at scale. My co-founder and partner coined that in a TED Talk and is teaching at HBS, but that's core to our strategy, is pragmatic innovation at scale where you're able to bring to bear strong modern technology embedded deeply in customer workflow that drives meaningful financial impact, clinical outcome benefits, while also operational throughput. And so from an AI perspective, naturally it's going to be an enabler and accelerant in all of that. And there's likely to be some developments there that most don't yet see.

So, Noah, there's a lot of people kind of chasing this evolution. There's lots of room to be wrong. You can be directionally right, but tactically wrong. In other kind of innovations where there are a lot of companies formed around an innovation, they weren't wrong on the direction, but a lot of those companies failed. Where is there room for investors to be dramatically wrong?

In terms of being dramatically wrong and what the guardrails are for being wrong while still succeeding, if you will, if I'm getting the question right, Geoff, ultimately, our view is that there's a generational transition in health tech, pharma tech between investment mindsets and strategies. And for decades now, most healthcare sector specialists have been services investors, clinical services and administrative services. And credit to those GPs, they've driven really great returns. And yet, one thing has been true across the board. Most of those strategies have revolved around inflationary business models and investment strategies, meaning, how do you drive price up? How do you drive consumption up? And that's largely fueled a lot of the growth in the healthcare sector in general.

However, our view is that on a forward basis, this certainly reveals the tech side of our firm, we believe fundamentally that we're in a deflationary forward era where successful companies, strategies, business models, and the managers that own those companies will be bringing to market and driving products and solutions in the market that are deflationary in nature. It's what the country needs, it's what society needs, but not in an altruistic way, in really a risk-return perspective for healthcare and life sciences in general.

And that's where health tech, pharma tech investing with the deep-sector-specialist approach and deep-operational-value-creation methodology comes into being where if you're crafting deflationary solutions, it helps customers. It collapses waste within the value chain, meaning there were six parts of the value chain, now there's four. And by removing that waste, it's dead weight lost, an economics term that comes out. And that value accrues to customers, to society, but also to investors. And so our perspective is that it's a paradigm shift from inflationary investing in businesses to deflationary technology-forward capabilities that really drive better outcomes, operational throughput and access while also increase precision for patients and providers.

On that optimistic view of the future, I think we'll end it there. Noah, it's always good to chat with you. I really appreciate you joining. This has been a ton of fun.

Geoff, great to talk. Thanks for having me on. Always appreciate chatting and catching up.

Thank you for joining us on this installment of The Corner Series. To learn more about today's discussion, please email host Geoff Cockrell at [email protected]. We look forward to hearing from you.

This series was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this series, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in this installment. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This series should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.