SaaS is dead! SaaS is back! VC funding is down! Now it’s up!
These headlines get the clicks, but there are only two reasons SaaS founders should pay attention to these trends.
1) You’re serious about selling your company in the next 6 months.
Whether you have outside funding or are bootstrapped, a rising tide of M&A activity and funding usually translates into higher valuations.
Is the window open? Are your odds a little better? How’s the mood in the markets?
Timing matters when you sell, so it pays to watch the waves in the market.
If you’re not selling soon, almost everything you hear about this quarter’s SaaS valuations, stock market multiples, interest rates, and hype doesn’t matter.
2) Funding and financial trends create demand waves in your market.
Interest rates and economic waves affect some industries more than others. These mood changes affect near-term demand, so it pays to watch the weather and adjust accordingly, on top of your normal seasonality.
If you sell to funded software companies, as many SaaS companies and service providers do, it pays to watch for slowdowns and uptrends so you can speed up or slow down.
Other than that, reports of these quarterly ups and downs are just distractions.
Just serve your customers better, improve your business, fix your stuff, and keep growing efficiently.
Many folks will say these market trends are important if you’re trying to raise VC funding for your startup.
True, funding goes up when the stock market goes up, when the mood is good.. But funding valuations also go up, which means founders have a higher bar to exit successfully 5-10 years from now.
Founders take on higher risk with bigger checks and higher valuations. The house always wins in the funding game. The joke’s on you.
Warren Buffett’s famous quote is, “In the short run, the market is a voting machine, but in the long run it is a weighing machine.”
Market moods don’t matter much to SaaS founders.
They will either be up or down sometime in the future when it might matter to you, but it doesn’t matter much this quarter or this year.
A great SaaS business is a virtuous compounding machine that grows from the inside out.
Grow your revenues efficiently and keep improving your business and your products. Inside out.
That’s what I have seen running software companies for almost 30 years, and I see working with 40 serious SaaS founders every month.
