Inc - Is SaaS Dead?

There’s a bit of a malaise hanging over the SaaS world today. AI excitement obscures it a bit, but it’s there.

A feeling that:

• Growth has slowed everywhere (true overall. The average public SaaS company is now growing less than 20% a year!)
• Sales is so much harder, and the old playbooks aren’t working well
• Folks don’t want to work as hard anymore
• There are even more competitors than ever
• Every leader is competing with each other, trampling on their turf (Gong v. Outreach v. Salesloft v. Zoom, or Rippling vs. Deal vs. Gusto vs ….)
• Layoffs have become normalized
• Customers are angry from endless price increases and upsells
• Budgets are being cut to find budget for AI (true)
• Every renewal is not just a battle but a downgrade
• Profitability is all that matters
• VCs have checked out in a lot of non-AI SaaS
• A feeling we’re in a massive “downturn”, even as the overall U.S. economy still is booming
• A feeling products have fallen out of product-market fit, or at least, become more “nice to haves” vs. must haves
• Even healthy customers scrutinizing budgets in ways they haven’t in many years
• Happy customers churning simply because they have to cut apps
• A feeling things actually won’t ever get any better or easier in SaaS

In SaaS at least, I’ll give you one metric that is fairly reliable:

How many dedicated sales professional do they have, just 100% selling the competitive product?

If it’s none yet, it’s an experiment. If they’ve just made a “Head of” hire, it’s an experiment, but one that is getting budget.

If you can find > 20 or so sales reps selling it on LinkedIn, then your BigCo is taking it Seriously.

If not, and it’s a sales-driven space … they aren’t.

Building a 1.0 competitor is not that big of a deal for a BigCo.

Dedicated some engineers to it even isn’t that big of a deal. You usually have a lot of those as an SVP in a BigCo. There are always a few good engineers in every departments at Big Tech Cos there to build 1.0 versions of new products.

And just throwing another product to sell to existing reps that sell the ‘main’ products isn’t a big deal, either. This doesn’t work well, but doing it isn’t a big deal. Again, just an experiment.

But hiring 20, 50, 100+ dedicated sales reps, reporting to a dedicated VP of Sales just for that product? That’s more unusual at a BigCo, especially one with many products.

That’s real extra expense, extra complications, and real changes to the org chart. It will impact fiefdoms and budgets and annual planning.  Especially because as that sales team grows, it’s going to consume even more budget next year.

BigCos. only do this once they are at least semi-serious about winning in a space.

Always take the competition seriously.  But take the BigCo clone more seriously once they’ve really started to build out a true dedicated sales team to sell it.

This edition of the SaaStr Daily is sponsored in part by Stripe

Stripe Sessions brings together business leaders and builders to discuss the most important internet economy trends. In 2024, we’re focusing on what’s possible—and what’s inevitable—as technological advancements change the world and the global economy with it.

So I’ve been investing since 2013.  Some of my top investments at seed stage include Pipedrive, Salesloft, Talkdesk, Algolia, Gorgias, Greenhouse, RevenueCat, Owner, Treasury Prime and more.

The goal for SaaStr Fund is to invest in 2-4 of the very top seed / late seed startups from $10k-$150k in MRR.  Earlier than that is too early for us to see it; after that is a bit too late.

We write checks from $750k-$4m and ideally lead or co-lead the round.

More here:

www.saastrfund.com

So we’ve been doing SaaStr Annual’s since 2015, and we’re excited for the biggest and best SaaStr Annual 2024 ever, Sep 8-10 in SF Bay Area, as well as 5,000+ at SaaStr Europa 2023 in London in June.

Now we sell a lot of sponsorships to these events — over 200 top-tier sponsors.  So we’re biased.  But we’ve also learned to turn away a lot of sponsors.  In fact, we turn away the majority of the folks that reach out.  Because we want to make sure they have real ROI.  Most importantly, we turn away a lot of smaller startups with limited marketing budgets.  We tell them instead to come back and sponsor a SaaStr event next year, when they (and their budgets) are bigger.

And yet … you really want to be at the top events in your industry.  Maybe not the ones no one goes to.  But you do really want to be at the top 1-2 events each year at a minimum.  They just attract the best buyers, the best partners, the best colleagues, and more.

So how do you “do an event” — with no budget?

Well, many SaaS startups at, say, under $5m ARR say it’s better to hack an event.

What does that mean?

Up Next: Wednesday, April 17th @ 10AM

Topic: How to build GTM Efficiency in SMB Sales

Speaker: Kyle Norton, CRO @ Owner.com

Workshop Wednesdays is new series where we’ll be bringing some of the best SaaStr speakers to you LIVE, every Wednesday. 

Each workshop will be hosted in a live, interactive 30-minute format at 10am Pacific each and every Wednesday. This workshop will be 100% LIVE, not pre-recorded, and will be hosted in an, interactive 30-minute format, including Q&A.

The best thing I’ve read in some time was the advice Nick Saban, the winning college football coach in history, gave to Alabama’s basketball coach who kept getting … close. Almost there.

Alabama basketball kept getting upset, and the call went to Coach Saban. “What have we got to do to go all the way?

”The answer: “Don’t dwell on it. Focus on the next opportunity to come. Next, Next, Next.”

This is the best advice I can give to 90% of LinkedIn, to folks in tech who feel the ball hasn’t fully bounced their way. Sometimes, it’s even the best advice I can give to myself.

As we gear up for 2024 SaaStr Europa (June 4-5 in London) and 2024 SaaStr Annual (Sep 10-12 in SF Bay), I wanted to highlight some of my very favorite Annual sessions from the past you may have missed.  This was certainly one of them.

Jyoti Bansal, Founder and CEO of harness.io, and Dev Ittycheria, President and CEO of MongoDB, held a fireside chat at SaaStr Annual. What 2 great CEOs and founders talk about … amongst themselves.

They talked about:

• product adoption
• sales alignment
• freemium models
• if repeat founders are any better
• and so many lessons they have learned throughout their successful SaaS careers.

As two CEOs who love the art of sales and scaling, this one really was special.

First, bear in mind acquisitions are relatively rare. The vast majority of startups will never get one acquisition offer, let alone a good one. Still, it’s not random. I’ve been through it twice as a founder and about ten times as an investor.

At a high level, three things you can do that aren’t very hard will increase the odds you have an “exit”:

• First, build the best product in an important space. It really is this simple. If you are #1 in an important space, the potential acquirers, if there are any, will eventually pay attention.
• Second, get attention. Acquirers read TechCrunch just like everyone else. They assemble a list of companies they should pay attention to based on media, events, and customer and partner conversations.  This isn’t magic, but it does help.  You’d be surprised how leaders at Big Tech Cos hear of startups, and who they know about, and who they don’t.  It can be pretty isolating off in that corner office.
• Third, build relationships. Get to know as many of the senior folks at your potential universe of acquirers as you can. And this can and will take years.  You’ll hear this story again and again from founders that were acquired.  This is good for your business anyway.  But as you’ll see below from one of the ex heads of M&A at Google, so many deals are driven by folks well know for years to the head of a certain division, product, area, etc.:
• And fourth, just talk to PE firms that approach you, especially after $10m-$20m ARR, that reach out.  This is a world you likely won’t know much about in the early days.  But in SaaS, as you cross $10m, $15m, $20m ARR … Private Equity firms will start to reach out.  Just take the call.  They have money to buy good SaaS companies not burning too much cash.   There are pros and cons to selling to PE.  But one big Pro is you often don’t have to stay.  Vs. a tech company will want you to stay for years.

© SaaStr 2024

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