May 6, 2022 · 45m · saastr
Doug Pepper, GP at Iconiq + Jason Lemkin of SaaStr: "Where Venture Is Right Now"
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this SaaStr interview, Jason Lemkin speaks with Doug Pepper, General Partner at ICONIQ Growth, to dissect the 2022 SaaS market correction, analyzing valuation resets, the divergence between public stock prices and strong business fundamentals, and practical strategies for founders navigating the new venture capital landscape.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Jason holds 44.6% of the talking time here. How this is scored →
Jason as informed peer 6.9 Guest teaching 4.6 Guest disagreement 2.1 Jason pushing back 2.5
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 13:16 Pepper rejects Lemkin's panic framing
Pepper directly disputes Lemkin's assertion that the market is experiencing widespread panic, countering that experienced venture investors are calm and see current valuations as fair.
Hardest push from Jason ▶ 20:15 Lemkin identifies logical gap in early-stage dynamicsLemkin refuses the simple framing that early stage is insulated from the growth freeze, pointing out the mathematical reality that seed companies will eventually hit an impassable Series A/B gap.
Biggest teaching moment ▶ 10:49 Pepper explains multiple compression and pre-COVID mediansPepper delivers a sobering lesson in valuation math, showing that despite 50-80% public SaaS drops, valuations have only returned to pre-COVID median averages.
Jason holds their own ▶ 27:00 Lemkin dictates dilution and multiple math to foundersLemkin showcases his operational expertise by walking step-by-step through dilution, target multiples, and ARR comp analysis required to underwrite high-growth private rounds.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| The SaaS Paradox: Record Fundamentals vs. Falling Valuations | 7 | 3 | 1 | 2 | Lemkin opens with strong domain expertise, citing specific public earnings and growth rates from Datadog and Bill.com to frame the market paradox. Pepper agrees with the operational thesis and provides a measured perspective clarifying that public valuation compression is separate from business execution. | |
| Inconsistent VC Advice and Lessons from the 2016 Crash | 8 | 4 | 2 | 3 | Lemkin challenges the sudden shift in VC advice and recalls detailed historical parallels from the 2016 SaaS crash (Tableau, Marketo, LinkedIn). Pepper, drawing on his direct board experience during Marketo's sale to Vista, adds firsthand context on exiting during a panic. | |
| The Bull and Bear Cases for SaaS Multiple Compression | 6 | 6 | 4 | 4 | Pepper systematically lays out the bull and bear valuation cases, pointing out that current multiples are merely at pre-COVID medians rather than cheap. Lemkin insists there is widespread panic among founders, but Pepper politely rejects this premise, stating experienced investors feel calm rather than panicked. | |
| Fundraising Realities Across Growth vs. Early Stage | 7 | 6 | 3 | 4 | Pepper breaks down the divergence between series B+ deals and seed-stage activity, explaining how massive balance sheets are insulating top startups from immediate fundraising needs. Lemkin pushes on the logical inconsistency of active seed rounds when downstream growth rounds are stalled. | |
| Return of Diligence, Secondaries, and Growth Underwriting Math | 8 | 4 | 2 | 3 | Pepper explains Iconiq's growth underwriting discipline, showing how they factor in multiple compression to achieve 3-5x returns. Lemkin demonstrates deep familiarity with private equity and growth metrics, advising founders how to model comparative growth rates against public comps like GitLab. | |
| Private Equity Buyouts as a SaaS Market Floor | 6 | 5 | 1 | 2 | Lemkin explores whether PE buyout activity will set a market floor for $15M-$25M ARR companies. Pepper shares institutional intelligence confirming massive private equity dry powder and recent high-multiple acquisitions like Thoma Bravo buying SailPoint. | |
| Dry Powder, Extended Fund Cycles, and LP Indigestion | 6 | 5 | 1 | 1 | Lemkin inquires about LP markdowns and the real pace of dry powder deployment. Pepper clarifies that fund deployment cadences are returning to standard two-to-three-year cycles and explains the historical pattern of LPs investing in post-correction vintages. | |
| The End of Momentum Investing and Core Takeaways | 7 | 4 | 3 | 1 | Pepper critiques young VCs who only know momentum investing and warns against crossover funds moving early without support capabilities. Lemkin agrees, summarizing the conversation's core takeaways regarding runway extension and sub-$1B fundraising availability. |
Statements from this episode (17)
Pepper: 2022 SaaS sell-off reflects valuation excess, not business performance
“And I think what that tells you is that the performance of the companies is often disconnected from the valuations. And so what we're seeing today is not a judgment on the performance Of the companies or their quality or the opportunity ahead. It's simply a re…”
Pepper: 2022 valuations will look like great entry points within 3-5 years
“Our bet is that over the long-term three to five plus years, we're going to look back at today and see very good entry points for certain companies.”
Pepper: Well-capitalized market leaders should accelerate in downturns, not cut burn
“There's going to be some that are market leaders that are performing really well, that have three years of capital that you say, let's hit the gas and separate from competitors. There might be others that are having a tougher time that don't have two years of …”
Pepper: Marketo sold for $1.8B before Vista flipped it for $4.5B
“And we sold Marketo for 1.8 billion. Phenomenally great outcome. And then Vista sells it two years later for 4.5 billion. And we felt like we left a lot of money on the table. It was actually kind of painful despite being a great outcome.”
Pepper: 50–80% Drops Only Brought SaaS Stocks to Pre-COVID Median Multiples
“We were down 50 to 80%. Right. And many of these names today. But as you know, as well as I do, we're only now at median pre COVID trading multiples. So by no means are stocks cheap today.”
Pepper: SaaS Multiples Will Settle Higher Than May 2022 Levels Within 24 Months
“I happen to be one of the bulls and I'm not calling the bottom. That's not our job to pick the bottom, but my guess is that we do settle out at multiples higher than today over the next. 24 months. And we get back to that being normal as opposed to normal bein…”
Pepper: Growth VCs Mistakenly Assumed Every Startup Could Become a Decacorn
“The big mistake that the growth stage investors made over the last couple of years pivoting off of what you just said was not that we thought everything could be a unicorn. It's that we thought everything could be a Decacorn. I think that this environment is p…”
Lemkin: B2B SaaS Startups Will Avoid Widespread Layoffs Due to Cash Reserves
“I don't think there's going to be very many layoffs or issues and B to B companies because they're very well funded.”
Pepper: SaaS Valuations Will Fall in 2-4 Quarters as Founders Need Capital
“I think it's going to take two, three, four quarters. For those companies that raised in early or mid 20, 21 to need to come back and there will come a time where they need capital and the pendulum will swing from, you know, purely power on the part of founder…”
Pepper: Regretting Every Sale Signals Venture Market Peak
“And I think the moment you feel that way, that you regret every sale and believe that you should just hold everything forever is maybe a good signal that we're nearing the top.”
ICONIQ Models Exit Revenue Multiples Compressing From 30x to 10x
“We're investing today at a 30 times multiple of revenue, and we're assuming in five years from now when we exit, that we're going to exit at a 10 times multiple. So we always factored this compression into our models, even before this happened.”
Pepper: ICONIQ Underwrites Minimum 3x to 5x Returns
“So we don't underwrite to 10 X, but we underwrite to three to five X minimum, but we always want to understand and believe in that.”
Pepper: VC fund deployment cycles will normalize back to 2-3 years
“In the last two or three fund cycles, we were investing each of those funds in one year. I think we're going to see fund cycles normalize back to a two or three year fund cycle.”
Pepper: LPs will allocate less to VC and prioritize re-ups
“Those marks are going to be tough in the next couple of quarters. So yes, I think like all of us, LPs are reassessing the environment, trying to figure out what to do, And my guess is that they'll do what many others are doing, which is retrench a bit. And my …”
Pepper: 2022-2023 VC vintages will outperform 2020-2021
“Probably the best fun vintages are going to be 20, 22, 23, as opposed to 20, 21.”
Pepper: A generation of VCs and founders must relearn how hard venture is
“I saw countless careers that were ended by 98, 99 by learning the wrong lessons. Yeah. And I think we have an entire generation of investors and some founders That need to learn new lessons about how hard it is to actually play this, you know, startup ecosyste…”
Pepper: Crossover investors moving earlier damages the startup ecosystem
“When I hear about some of these crossover investors moving earlier, it really scares me. I think some of them have done an amazing job innovating at growth and I respect them for that. But I think the dangers to the ecosystem of those same investors going earl…”