2022 tech valuations are down, but it’s not a tech recession yet

There has been a serious pullback in the valuations of private and public software companies this year.

But I’m not seeing a serious pullback in demand for software tech from business or consumer buyers. Not yet.

For speculative web3 and crypto startups that raised funding at crazy valuations last year, this will be like the dot-com bust of 2000/2001. They will struggle to grow revenues. Many will go away, but a few will survive.

For SaaS and other software companies, the next couple of years won’t be like the dot-com bust or even the Great Recession when both funding AND business dried up.

  • There will be less funding at more reasonable valuations, but early-stage funding is NOT drying up completely like it did in 2001.
  • The SaaS business model with recurring revenues is 10x more resilient than the old software biz model used during the last two big recessions. Most up-and-running SaaS companies will have a pretty steady business.
  • Tech markets are much bigger now and tech is much more of a requirement in our business and personal lives. Tech was optional in 2001 and 2007. Now we are dependent on our tech.
  • There are more self-funded companies that are profitable or breakeven and they aren’t affected by asset bubbles and bursts. They are still serving customers and growing just fine.

A big recession may still happen that causes businesses to pull back on software spending.

This would be OK but not great for most installed B2B SaaS software companies. We won’t be canceling our Zoom or CRM subscriptions.

A recession with tighter budgets and less investment spending will make it harder for new solutions that are just starting or are still immature. No extra budget to try things that are new without proven ROI.

A return to more practical valuations and business plans isn’t a bad thing for the software industry as a whole.

Software is still eating the world.

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