Jason Lemkin
Here are some pointers from Jason Lemkin (SaaStr) on the state of SaaS.
July 7, 2024: “So folks in venture are back to business. 2022 was a year of dealing with the fallout of fallen unicorns, terrible deals, and slashed valuations. 2023 was a year of capitulation, markdowns, and more. But also — a year of AI excitement. The epic growth of OpenAI, Databricks and more have enticed VCs at the Series A and later stage back to work. It was 2 years with a lot of pausing in venture. Now, venture is back to work. The seed markets remain vibrant, and later-stage investors are looking at more deals. Redpoint in our recent Workshop Wednesday noted 2024 is sort of back to normal for growth investing now … and that we may be reaching the end of the bottom in net new VC investing. But … but … here’s the thing. A reality has set in. It’s Year 3 of the Venture Downturn in SaaS.”
June 18, 2024: “Liquidity is down 50% in Private Equity…Private Equity overall and Venture Capital in particular had an insane amount of “exits” for high dollar amounts in 2021. An IPO a week, and seemingly, a billion+ exit every week as well. From Slack selling for $27 Billion to Salesloft for $2.5 Billion and so, so many more. It just makes sense there would be a hangover after that era. And indeed there is. But while Venture Capital and Private Equity are overall built to be patient, and wait 10+ yeas for returns from any given investment — in exchange for higher returns — they aren’t build to be all that patient in the aggregate. PE and VC expect a steady stream of returns each year to, at a minimum, recycle back into new VC and PE funds. Right now, that’s at a decade+ low. And it’s looking like 2024 is much of the same.”
June 6, 2024: “To start adding eight figures and then nine figures of new bookings a year, it can really help to focus on bigger customers. And bigger customers almost already have higher NRR. Which makes them even more valuable. What I worry is when it’s going all-in on bigger customers and going enterprise is for too many tactical reasons. To combat the fact that new customer growth has slowed. Then it can often mask issues around new customer acquistion for a year or two. And what I see in that case is folks often abandoning their long tail. They stop supporting, or at least investing, in their smaller customers. Their advocates. Their biggest champions. And some times, folks that can grow into larger accounts over time. As founders especially, you have to fight for the smallest customers. You have to fight for the ones than in 3-5 years may get bigger. You have to fight for the ones that may only pay $29 a month, but tell 100s of folks how great you are.”
April 6, 2024: There’s a bit of a malaise hanging over the SaaS world today. AI excitement obscures it a bit, but it’s there. A feeling that:
- Growth has slowed everywhere (true overall. The average public SaaS company is now growing less than 20% a year!)
- Sales is so much harder, and the old playbooks aren’t working well
- Folks don’t want to work as hard anymore
- There are even more competitors than ever
- Every leader is competing with each other, trampling on their turf (Gong v. Outreach v. Salesloft v. Zoom, or Rippling vs. Deal vs. Gusto vs ….)
- Layoffs have become normalized
- Customers are angry from endless price increases and upsells
- Budgets are being cut to find budget for AI (true)
- Every renewal is not just a battle but a downgrade
- Profitability is all that matters
- VCs have checked out in a lot of non-AI SaaS
- A feeling we’re in a massive “downturn”, even as the overall U.S. economy still is booming
- A feeling products have fallen out of product-market fit, or at least, become more “nice to haves” vs. must haves
- Even healthy customers scrutinizing budgets in ways they haven’t in many years
- Happy customers churning simply because they have to cut apps
- A feeling things actually won’t ever get any better or easier in SaaS
