2013: “SaaS really only works in the U.S.”
2015: “We need to come to the U.S. to go big in SaaS”
2018: “It would still help a lot to come to the U.S.”
2020-2021: Now we find out what happens when no one does.
— Jason ✨InItTogether✨ Lemkin (@jasonlk) April 28, 2020
Things are so crazy right now, and beyond that, the pace of change is almost incomprehensible. Zoom has grown 20x in usage in a little more than a month. But at the same time, we added 6,000,000 new to the unemployment rolls. SaaS for some industries is being decimated in just a week or two. In other cases, unexpected upgrades and leads seem to come out of nowhere.
We are going to see some sort of rapid evolutionary change in SaaS. Exactly where is hard to see right now.
But one thing that has already started is the erosion of the SF Bay Area as the Global HQ of SaaS.
Start-ups have certainly became very global in B2B in the past 5-7 years. Atlassian, Adyen, Shopify and so many other leaders weren’t founded in the U.S., let alone the Bay Area. MongoDB, Datadog, and others have given New York a stronger and strong place in SaaS and Cloud. In 2013, everyone that could come to the Bay Area to run a SaaS company, did. By 2018, it felt like about 50%.
And yet … and yet … network effects are real. The Salesforce alumns are here in the Bay Area. They founded Veeva, and Okta, and help run Twilio today, etc. They are all here, too. It’s the same with Google and so many other leaders helping run Stripe and more. And a whole generation of entrepreneurs will spin out of Stripe. Also based here in SF Bay Area. Zoom and Slack? Here, too. And even older tech leaders like Adobe that are here have seen a huge resurgence from the Cloud. 80% of public SaaS companies are HQ’d the Bay Area. Even with more and more remote teams, SF often at least remained the hub, the HQ, for SaaS and Cloud start-ups.
And so much business is still done through relationships. And so many top VCs are still based in the Bay Area. That builds on itself, no matter how crazy the cost of living is in San Francisco.
Really, it has seemed that no matter how much other global centers built up in SaaS and Cloud, from Seattle to New York to London to Paris, the Bay Area would likely build up even more. At least in SaaS. It compounds. It all does.
But now, early into shelter-in-place, we are already seeing changes that for the first time that could disrupt that. Teams that have dabbled in remote have already adopted. In just a few weeks, we’ve all become a Gitlab, a Zapier, etc. A great company I am close to that moved its entire team at great cost to SF from Washington D.C. a ways back … just canceled their entire lease and went 100% distributed in just 2 weeks. We all know how to do this now.
And the more time that goes on in shelter-in-place, the better we will all get at being distributed. We’ll get better at recruiting. We’ll get better at HR. And then, finally, if this going on for long enough, we’ll learn how to fundraise even a Series B during shelter-at-home.
Things will come back. And being able to Lyft over to Zendesk or Salesforce was a big deal, and will be again.
But it feels like each week of shelter-in-place is one more percent the network effects of the Bay Area in SaaS are diminished. 50 weeks, it may be gone by half. More than a year?
It may be that the benefit of San Francisco after a year of shelter-in-place … is muchly gone.