Let’s all be clear, 2021 was insane:
* SPACs worth billions with no revenue
* Multiples magically tripled
* Fintechs with 10% GMs worth same as 80% GMs
* #5 in market got same premium as #1
* Growth stage seen as free money
* Seed VCs bought in $3B-10B rounds vs sell— Jason
Happy
So as we’ve talked about before, these are Strange Days in SaaS. The best in SaaS and Cloud are growing faster than ever … yet are worth less than half of what they were not all that long ago.
Where will be when we come out of this? Will we come out of it at all? Or is this The New Normal?
I don’t know. You don’t know. And certainly, 90% of the VCs on Twitter don’t know.
But there are a few things we do know now. Things that made no sense in 2021, but happened anyway … in the end, didn’t make sense:
* Gross Margins matter. In late 2021, especially in fintech, it seemed all revenue was ARR, and it didn’t matter what the margins were. All your revenue in low-margin fees? No one cared. All that mattered was top-line growth. I suspect those days are behind us forever.
* High Burn rate SaaS startups will still exist, but they will be much rarer. Discipline was lost in burn rates in 2021 and early 2022. Burning $700k a month to book $200k? Who cares if the next round is coming! Big category winners will still raise big rounds, if they can, to win. That playbook still works. But it will only work for a far smaller number of startups with the growth, the numbers, and the stomach for the high burn playbook.
* The Next Round will generally be harder, not easier. This almost got inverted in 2021. But the next round now again generally gets harder, not easier. The bar goes up, and the higher valuations make it tougher for VCs to earn a top return.
But … but … now here’s the thing.
* There will be more Figmas. Everyone’s jaw dropped when Marketo was acquired by PE for almost $2B. Then everyone’s jaw dropped when Yammer was bought for Microsoft for $1.5B. Then again when Qualtrics was bought for $6B, which seemed like a high water mark. Except it wasn’t. $10B+ acquisitions followed, and then … $20B for Figma.
SaaS got hard again in 2022. It really did. But it’s still bigger than ever.
A Figma every few years, combined with a Datadog or two every year, will keep innovation (and venture capital) flowing.
It’s just it won’t likely be like 2021 ever again. Or at least, not for a very long time.
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Jason Lemkin, Khareem Sudlow
