I don’t know what’s going to happen in 2024 with SaaS funding, tech IPOs, M&A exits, or AI breakthroughs. But there are a few long-term trends I’m betting on that affect the SaaS industry.

I’m not losing any sleep over what negative events or crises are coming. They will come whether I pre-worry about them.

I’m not betting the farm that VC funding will turn around or interest rates will go down. Those are out of my control.

Here are some of the long-term trends I’m betting on:

1. Software will continue to eat the world. More software powers more things every year. AI will likely accelerate this in the next few years. Software becomes a more material part of every economy every year–and more strategic to every country.
2. SaaS software will get cheaper to make, for most software companies. VC money is piling into the large platforms that enable SaaS entrepreneurs to create more powerful software faster and cheaper every year.
3. Most software companies will think about making profits earlier than they did before. There will always be big moon-shot VC bets, but most SaaS startups and public tech companies will think about profits and staying that way as they grow, at least for the next few years. Quality over quantity.
4. The SaaS business model with steady recurring revenues and high gross margins will be preferred over other transaction-based business models. Investors and acquirers will continue to pay premiums for companies with high-quality SaaS revenues.
5. The software startup ecosystem will be more global every year. Not just remote developers all over the world but also software companies and savvy entrepreneurs. If you don’t need VC funding to create a valuable software company you can do it anywhere, not just in big tech hubs.
6. It will be hard to grow and differentiate using traditional sales and marketing channels, so alternative channels will power the next fast-growers. Less of “just add salespeople and outbound-the-crap out of your prospects.” More like creating an active community, an expert influencer’s audience, or a practical partner channel. High-leverage tactics that you can’t just throw money at.
7. Small vertical SaaS startups with a narrow industry focus will continue to create great opportunities for practical SaaS entrepreneurs to build valuable software companies without big outside funding. Every tiny vertical CRM company can compete and win against Salesforce by building and marketing a specialized solution “just for _____ .”
8. Practical generative AI solutions will show up in our existing SaaS software solutions before AI-powered business models try to take over. Like how human-assisted driving is almost universal now, but driverless cars are not. Maybe someday, but not yet.

That’s how I see the trends for the next few years that effect the SaaS software industry.

What SaaS trends do you see?

#practicalfounders