So the #2 topic in SaaS today is probably profitability and efficiency.  #1 is AI.  But profitability is a close second.

And the message to founders is confusing.  Yes, everyone has to be at least 2x as efficient as 2021, maybe more so.  But … that’s not enough.  You still have to grow.  So what’s the trade-off?

I pulled up 3 recent examples from the SaaStr 5 Interesting Learning series, and interestingly, all 3 are at ~$2.5B ARR:

  • SMB leader HubSpot
  • Enterprise vertical SaaS leader Veeva
  • And collaboration leader DropBox

All at the same ARR, but with very different growth profiles, and profitabilty.

What you can see is that HubSpot is profitable and fairly high growth, and trades for now at about the same impressive market cap as Veeva.  Veeva is growing more slowly, but is extremely profitable (39% margins).  DropBox though?  It’s trading at one third the price of the HubSpot and Veeva.

So if you are going to trade off some growth for profitability like Veeva, it better be massive profitability.  Veeva exceeds the “Rule of 50”.  DropBox is very profitable, but it’s just not growing fast enough.  HubSpot is growing the fastest, and yet still has strong but not yet 35%+ margins.

There’s no perfect answer here, but analyses by Bessemer, Meritech, and Emergence all come to the same conclusion:  Profitability matters at scale in SaaS now, but Growth Matters Twice as Much.

A bit more here:

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