The Golden Era of SaaS

Earlier this week I posted a 1-hr video on YouTube titled “How To Efficiently Monopolise Your Market in 2024”.

In the video, I shared some thoughts on the 11-year bull run that was responsible for putting SaaS 'on the map’, aka the Golden Era of SaaS.

From the chart above, you can see why it’s been named the Golden Era. The market peaked in 2021, with over 121 tech IPOs taking place — the largest number since the dot-com boom of the 90s.

The significant increase in market value during this period can be attributed to (amongst other factors) the world going remote as a result of the 2020 pandemic, with cloud-based infrastructure passing the vibe check — before this many were skeptical, but it held out as businesses were operated from kitchen tables and a big chunk of the word’s educational system was delivered via Zoom (which they capitalised on).

All good things come to an end

Looking at the chart again, you might have also noticed a huge amount of market value being wiped off the chart around the beginning of 2022, with ~52% of value disappearing throughout the year.

The market crashed. In a short few months, companies went from Growth At All Costs to striving for Default Alive. 

As a result of this crash, over 400,000 people were laid off from over 2,200 tech companies.

Why did the market crash?

This period of time wasn’t exactly something to rave about:

• Russia invaded Ukraine in early 2022

• Printed money that was pumped into the global economy caused inflation

• Consumer sentiment changed as post-pandemic life went back to normal

However, a huge contributing factor to the bubble being popped was the Growth At All Costs culture.

As a result of low-interest rates, venture capital was poured into companies ($128B in 2021 vs $73B in 2020) so entrepreneurs were incentivised to go big. With over two companies achieving unicorn status PER DAY in 2021, it’s no surprise companies wanted to do whatever it took to grow. Once-in-a-lifetime opportunities were on the table.

This gold rush incentivised short-term behaviours. Companies grew too fast, the wrong people were hired and a fundamental part of business was put on the back-burner: profitability. Companies didn’t care how much it cost or how it happened, they just wanted growth.

What does all of this mean?

Well, now that the party is over, we’ve entered a new era for SaaS: Efficient growth.

Access to venture capital is harder, companies have realised they might’ve prioritised the wrong things and everything is being questioned:

• Do early-stage companies even need to raise?

• Can customers be acquired without expensive tactics?

• Are large teams required?

One cliché statement is certainly true: companies are trying to do more with less.

Over the coming weeks, I’ll be sharing my thoughts on how you can do precisely that.

Liam

P.S. You can watch the full YouTube video here.