Some folks are waiting for the boom times of two years ago in software tech to return, but this is now the “old normal” and it will be this way for years.
Things have slowed down in most parts of the software business compared to 2020-2021 when it was crazy hot during COVID.
- VC funding is way down for B2B SaaS, especially later rounds. Investors are being very picky now.
- IPOs and strategic acquisitions are way down, so there are few payoffs for founders and investors who took on big funding.
- Software buyers are more disciplined (again) about their spending.
- SaaS businesses that sell to software companies are getting hit doubly hard since there are fewer employees and less crazy funding.
- Entrepreneurs with big ideas take longer to get startup funding, especially before traction with customers and revenue.
- Valuation multiples are down for public companies, PE buyouts, VC investment, and angel funding.
- Software startups that can’t get to sustainable revenue are shutting down.
- Growth rates for public and private software companies are half what they were a few years ago.
The recent generative AI boom is a small part of the software industry with funding and promise. But we also have busts in crypto and blockchain that are very quiet now.
This might look like doom and gloom, but the software business is still growing just fine.
We’re back to something that looks like the normal trendline. This has been hard to swallow for cool companies that got way ahead of themselves on funding, growth expectations, and staffing.
Good companies are growing, great companies are winning, and software continues to power the world.
This is what it was like five or ten years ago in SaaS.
And for those that use the excuse of a recession in the US economy, it ain’t true overall, despite interest rate hikes.
Some folks like to say that the best companies are created in the hardest times.
Great software companies are the ones that can survive the booms and busts and keep growing every year for a long time.
Funded or not, it’s a compounding game in SaaS. You only lose if you stop growing with sustainable revenues every year.
#practicalfounders
