SaaS Industry

“So the SaaS apocalypse was fully, fully averted by the sales forces of the world, and the revenue decline never showed up in the SaaS companies. And so the SaaS apocalypse was canceled.”

“And AI is such a sea change that I do think it is just this anti-incumbent technology across the board. It is, I mean, this is why we have a SaaSpocalypse now, is it's kind of questioning every software company's moat.”

“Moats still exist in the age of AI, but they're just like shallower, so you better fucking deliver value.”

“Re-acceleration will be exception, not the rule, right?”

“Unless you have a product that's good enough to charge for independently, You won't have revenue re-acceleration of any meaningful scale.”

“It turns out there's a lot of switches in the dashboard. Yeah. You know, there's no API for, and we are all as an industry collectively discovering that.”

“If you don't get on top of this soon, That 10 X revenues is going to go on a five and four and where the other seven percent growth was are. Fast forward five years, there's really only one or two stories. They get on top of this, they get a third market share…”

“I think that is going to be a concentration towards platform players.”

“It was 30% for about a decade and a half, but when you went into it, that's because anyone who goes, to your point, Jason, when you go below 10, you get the red card, you're sent off, you're told, you know, you go off. P.E. Land, but they were dropping another…”

“People saying they're going to zero are wrong. But if the assumption is you're fine, but you're not going to be growing indefinitely, like that shift from thought of as being a growth company to being a stable. That's a haircut, and again, it's combined with t…”

“The way you see it is, you're, you see those CIO surveys where they rank their priorities. And what happens is, you know, as AI has gone up the zeitgeist, it's gone up the priority list, and just something that was number three goes to number six, and then it …”

“It's not that we're going to rebuild workday in Salesforce and Oracle, but our competitive edges are going to be measured in months. And when they used to be years and that compounds that compounds. And if you can't run at that pace, I don't see how you're goi…”

“Agents will actually may make our moats even weaker and shallower because if the agents can just take prompt, if I can take a prompt from one app and give it to another app, my switching costs have gone down radically.”

“SAS has become like Japan. It's a great economy, but if everyone only has .9 kids. I mean, there's only, only so many seats to go around.”

“If you look at SaaS in 2021, The median growth rate for SaaS companies was 17%, and a quarter of those were growing over 25%, ok? If you look at SaaS today, The growth rate has been cut in half, 17% to nine percent, and only five percent of that cohort is now …”

“I think, and this is order of magnitude correct, that Anthropic in Q-one added 70% of the net new ARR in the SaaS industry, right, defined by public SaaS companies, right?”

“Independent of AI, the SaaS Industry was going to hit the mature stage. And you're right, Jason, it's all the things that happen at that stage. Bundling, consolidation, grinding out the weak, right?”

“I do think that a lot of that has worked through the system already. Companies that I'm, you know, a little closer to, I think most of that seems to be the trough, let's say is, you know, is behind us.”

“The long-term SaaS index for literally 20 years, since SAP and Oracle started disclosing their recurring revenues, has always been around five and a half to six times the XTM revenue. That is the median of the public companies.”

“In today's environment, the actual multiple is five to six times, and that's provided that you have growth. So even though we're moving away from a growth at any cost world to a world where efficiency is prized, the reality is that growth is still worth three …”

“In a world of, ah, higher interest rates, that really we need to be solving backwards from 12 to 18 months.”

“I couldn't disagree more. I sincerely believe it is the best time in a long time to be building SaaS companies and investing in SaaS.”

“Slack did its first price increase in history at eight months ago. I did a blog post. Every single leader in SAS that hadn't done a price increase did it. HubSpot did too.”

“I think it won't get easier for us until this is about eight X until we see 20 to 30% reflation in multiples.”

“There is a bit of the tail end of a SaaS-pocalypse going on where it has just been significantly more difficult to sell, to generate leads, to convert, to function in a ROI-positive, cash-efficient way than it was 18 months ago, 24 months ago, etc.”

“Everyone, every public company two years ago had -10, I don't know what Vimeo's was, -12 operating margins. In 18 months, they went to 15 or 20.”

“Now we're going to live in this bifurcated world where there's going to be whispers of folks working at Decacorns, and Decacorns, there'll be more snowflakes, and there'll be more ideas, and it's going to put a lot of pressure on the rest of us, because people…”

“From there, you know, this new cohort of customers, I think that retention is going to get back to a place where it's more like one, 10. So that can be one, 31, 40, but maybe healthy numbers like one, 10, one, 15.”

“No one's CAC went down the last year, even though they got more efficient, no one's CAC went down despite the a hundred SAS tools we bought, despite all of these things we didn't get.”

“It's never gonna be, it's gonna take 20 years to have a bubble, like we saw in 2020, it will happen again, but it's gonna take 20 years”

“But SAS is literally, we should do the math. It's gotta be a hundred times bigger in terms of spend, right? Just think about that's a decade of 20 to 30% annual growth compounding.”

“Now anybody in the SaaS industry knows that, you know, if you cross about ten million in ARR, then you are almost immortal. It's very, very hard to Kill that particular startup.”

“And if we end up 24 months into this, and multiples are sort of the same, I think we are in a new, efficient world For the first time in SaaS, we will not go back.”

“Over the last five years. Average competitors in a given industry in SaaS is up 1515, 16 X.”

“I'm going to finish with a bunch of hacks for the wartime CEO, and we're currently in wartime.”

“So when the lever you can pull is R and D expense, right. And you feel like you're just going to, the pace of innovation will just slow down a little bit. Then you can actually keep your revenue growth, but then drop your OPEX growth, right? The second that yo…”

“And I think that what that could do is cause a vicious cycle where we start seeing, I wouldn't say death spiral, I think this vicious cycle for the next year or so where seat contraction becomes the norm instead of seat expansion.”

“Two X is the new three X. If you can grow two X year over year in this environment, that is as good as, or better than growing three X last year.”

“And I think more than anything, it's a valuation reset as opposed to a fundamental company reset.”

“Historically, that number was around six. You know, the median SaaS company was trading at about six times their next 12 months revenue, and it went all the way to 15 during this sort of COVID bubble in twenty-twenty-one. And for the high-growth SaaS companies…”

“We in the SaaS industry for the last two decades have been focused predominantly on the front office. CRM, marketing automation, everything that touches the customer. We've largely ignored the back office”

“We noticed that when you are of a free or low tier plan on a SaaS product, you typically get horrible customer service because it's not cost effective to invest your employees time in communicating with these people because they're not bringing back the Financ…”

“Typically anything under about a 10% gross churn rate is pretty good. Anything under about a five percent gross churn rate is fantastic.”

“Anar did analysis of a bunch of SaaS apps. He got a bunch of anonymized data, and he looked backwards over the last five years. And if you do look at returns, it was not winner-take-all, but it was definitely a power law. And power law just means there are a s…”

“And then one thing that makes us different than really any company in the SaaS industry is we also have the talent component. So if you want to build essentially an outsourced marketing team through the platform with us, you can actually do that too. We don't …”

“In fact, if you look at all the publicly traded SaaS companies, over 80% of the total market value is inside of companies with E-forty or higher, less than 20% of the value is E-forty or lower.”

“So I think there's two things that people look at and point to point, point to the bubble, and one is revenue multiples that a lot of these SaaS companies are trading at, and I think it's both current and future expected losses, so lack of profits of a lot of …”

“I think the gold standard of the industry is, is one 10.”

“In terms of employee retention, you have to earn the employee base every month, every quarter, every year, and they are much more valuable than any individual customer that you have. And we obsess over turn As a SaaS industry, which we should. Turning the, ah,…”

“By the way, the entire game industry is now a SaaS model, as you probably know, software as a service, because people are now buying either a subscription or they're buying a pay-as-you-go Which is really where the game industry invented it, and the SaaS indus…”

“By the way, I think in a year we'll have a problem. Everyone will try to sell subscriptions. And then when a client goes in and said, okay, now I need to buy a 150 different subscriptions to things. It's also kind of crazy. So we'll have a different problem go…”

“I think best of breed companies do over a hundred percent, so they don't lose revenue, and the best companies will get to typically one 10 to one 20. It's pretty hard to get much more than this just because of natural growth of companies et cetera.”

“They've raised together over five billion dollars. If you added up all their revenue, they're doing about 1.8 billion dollars annually. So that would be a healthy company altogether, but get this, when you add up all the team members and divide it into the rev…”

“I think you always have to pay the, we always paid a premium for the best, and when the best grows faster than ever, we should pay the highest premium of all time.”