Raising Venture Capital in 2024? The Air is Very Thin Above $200M Valuations

If I had to summarize venture capital today, it would be like this: There is Very Little Oxygen Today Above $200m Valuations

What do I mean?

It’s still a weird world in venture:

Firms are both shutting down and raising new funds.

More entrepreneurs are doing direct investing themselves than ever.

Unicorns are hurting, but — Nasdaq is at an all-time high.

So net net we still see very high levels of seed investment. Folks are still hoping and dreaming that bet, as improbably as it might be, could still do 100x-1000x and becoming the next Datadog, Snowflake, Klaviyo, Samsara, Uber, etc.

But the problem in SaaS especially is that the average public SaaS company is trading for about $2 Billion, and at about 6x ARR.

So what? Well at least in theory, you can still make 100x or more at a $20m valuation if the company ends up worth $2 Billion. Sort of, if you ignore dilution.

It doesn’t really matter.

What I mean is, this is one of those things in SaaS that is over-analyzed, as if it will make a magical difference.

The sales team will like a shorter period, often, to help them close a deal that month, to shorten sales cycles. This is the real reason you often see 14 day (vs 30 day) trials — it helps the sales team. And that’s OK. It’s fine.  Just bear in mind that’s the real history behind the extremely common 14 day duration you’ll see at many sales-led SaaS leaders.  To help sales get the deal in this month.

Sometimes 14 days really isn’t enough to get enough usage out of the product, for sure. Then you make need to make it longer. On a one-off basis, or for all customers, or per edition. Say, 30 days. Which is also fine.

But …

What really matters is engagement.

How do you get the prospect to even use the trial period at all? Many customers, for many products, won’t just automatically start on their own. Most prospects aren’t like you and me. They don’t just grab-and-go.  Almost all of us underinvest in getting those Free and Free Trial users really going as quickly as they could.

In part one of this week’s Ask-Me-Anything (AMA) with SaaStr founder and CEO Jason Lemkin, he answered the community’s questions about whether all anyone cares about is AI anymore, investor appetites going into 2024, vertical SaaS, and thriving as a solo founder. Catch up on the first half here if you missed it.

In part two we head into IPO waters, how to incorporate AI into your products, the best way to drive employee performance, pricing models, and much more. 

“Doubling Down” is a new series where we hear from top B2B SaaS investors on their most recent activities and takes on the current market. We had a great one last week with Rebecca Lynn, Co-Founder & General Partner at Canvas Ventures.

This week we’re focusing on Nina Achadijian, Partner at Index Ventures!

#1.  What’s your most recent disclosed investment?  Why did you do the deal?

My most recent was a $4M seed round in Class Companion, announced in October 2023. The company is an AI platform that empowers teachers to give instant, personalized feedback to students, based in San Francisco. 

At a recent Workshop Wednesday, SaaStr founder and CEO Jason Lemkin answered the community’s most pressing questions about SaaS — from investor appetites and IPOs in 2024 to managing and hiring a Head of Sales as a solo founder to AI and the future of customer success. 

Let’s jump right into part one. 

So 2023 wasn’t a rough year for everyone.  Shopify, Canva, Monday and tons of other SaaS leaders especially those less focused on tech and startup customers had big years.  And broader Cloud players had a great year too, from MongoDB to Cloudflare to Azure, if not quite as crazy as at the peak of 2021.

But overall, overall … well SaaS and Cloud revenue growth hit record lows per the BVP Cloud Index.

© SaaStr 2023

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