People have been sending me “SaaS is Dead” articles and posts almost every day in the last month.
That makes for better clickbait headlines than the real truth that “SaaS is Changing, and It’s Complicated.”
Here is how I see it this year:
1) Most people who say SaaS is Dead are VC investors.
I can see why investors say it, since they can’t just throw money at B2B SaaS startups and expect them to grow fast forever. And there are almost no big exits (IPOs, strategic), so their crazy big VC bets aren’t paying off in huge exits with crazy valuations.
Their “greater fool” exit plan doesn’t work now, since PE investors are the ones buying up most SaaS companies, and they aren’t anyone’s fool.
The SaaS business is still solid and growing, but it’s not crazy anymore. This is great news for founders who bootstrapped or didn’t raise big VC funding. It’s not good for VCs right now. They are moving on to AI bets and telling us “SaaS is Dead.”
2) The SaaS business is growing fine and getting healthier.
The global B2B SaaS market is still growing at 20% this year. Companies of every size depend on software to run their businesses. Software is still eating the world.
It’s getting healthier too, because SaaS companies are getting more profitable (or trying to). The “Rule of 40” with rational profits and growth rates isn’t sexy, but it’s still better than most other businesses. SaaS companies still expect to be valued at multiples of revenue, not multiples of profits.
3) The SaaS business is changing.
B2B software buyers are pulling back and getting more demanding. Some vertical SaaS companies are feeling the headwinds of the economic slowdown in their industries. Software is easier to build, so copycat competitors and all-in-one expanders are proliferating.
And AI is finding its way into SaaS products. It’s making software businesses much more efficient. And it’s already frustrating many GTM tactics that used to work, such as outbound, social content, SEO and more.
The software business has always gone through huge technical and business model shifts. It just has been pretty steady for the last 10 years, which was an exception. So ride the waves of change like you used to when you started.
4) Some things are harder–and some are easier.
Most SaaS businesses struggle to keep their pipelines full and close at the rates they did two years ago. There are more competitors in most markets, some with big funding. Blended office/remote models are difficult to calibrate.
However, software is becoming easier to build, scale, and maintain with better tools, great APIs, and AI assistance for coders. And it’s easier to hire top tech talent in the US and everywhere else.
SaaS isn’t dead. It just changing in complicated ways.
As Yogi Berra said, the future ain’t what it used to be.
