SaaS company growth rates are down, SaaS app buyers are frugal, IPOs are nonexistent, public SaaS multiples are low, big tech layoffs continue, and VC funding for SaaS has plummeted. Is this the end of the SaaS era?
The B2B SaaS industry has had a great 15-year run. This era started to go mainstream around 2010 and has grown steadily since then, higher than anyone had imagined.
Are we at the end of the SaaS opportunity?
Is now a bad time to start a SaaS business?
No, I don’t think it’s the end of SaaS for serious founders.
It’s still a huge market that is growing steadily and offers plenty of new opportunities.
It’s just the end of the crazy era in SaaS, with crazy funding, crazy burn rates, crazy multiples, crazy salaries, crazy dreams, and crazy unprofitability.
There was a place for crazy during the tech boom, with zero interest rates, overfunded SaaS acquirers, and overhyped IPOs.
Now, there is no “greater fool” to buy your unprofitable, unsustainable, over-funded, and inefficient software company at any size. 80% of VC-funded SaaS companies with crazy goals and crazy burn rates won’t make it.
The crazy times are over in B2B SaaS.
It’s still a great time to start and grow a SaaS business.
It’s now the era of practical and efficient SaaS companies, large and small.
It was the era of big funding rounds, with big TAMs, 200% annual growth rates, and unicorn dreams.
– Now it’s the era of bootstrapped or capital efficient startups, modest or high profits, and reasonable growth rates for smaller markets.
B2B SaaS was the new thing for buyers in big companies and vertical markets for the last 15 years.
– Now SaaS is mainstream, so buyers are frugal and skeptical of magical sales pitches.
The SaaS recurring-revenue flywheel is still the best business model on earth, but it’s not for big-swinging VCs, for the most part. Maybe not even public stock markets.
– Private equity has been investing and acquiring B2B SaaS in a major way in the last 5-10 years. They are the most active buyers of SaaS companies–and of the majority of VC-funded companies that stalled.
You used to need VC funding to build serious software products, take them to market, and stay ahead of your competition.
– That isn’t required and generally doesn’t work anymore in the early stages of SaaS. Capital-efficient growth is possible, as it always was.
Yes, AI magic is coming to SaaS that will help us all build software faster, run our businesses efficiently, and create new value for customers. But this doesn’t need VC funding—VCs know this.
There are still infinite important problems that software can solve in the world, but most SaaS markets are smaller (at first), grow is slower, and won’t create billion-dollar exits.
There has never been a better time to start, grow, and sell a valuable software company–without big funding.
The world still runs on SaaS, even if VCs don’t.
What do you see in SaaS?
