I can be slow sometimes, but it’s taken me a while to understand what’s >different< in SaaS in 2023. Budgets are tighter, but SaaS is still growing, and folks are still buying more software than ever. Here’s what’s different: 2023 is the first time SaaS itself got harder since 2005
SaaS has never been truly easy outside of a window from mid-2020 to late 2021, but every year, it got easier and easier. Not easy, but easier and easier:
There was a bump in 2016, a Flash Crash in SaaS, when budgets were slashed, but it didn’t last long enough to really impact renewal cycles. SaaS markets had fully recovered later that year. Even the 2008-2009 downturn, while truly brutal, didn’t hit SaaS as hard as the rest of the economy. The best of us kept growing, albeit with elevated churn through 2010:
And to those of us who have been doing SaaS a long time … 2023 just feels Like it Used to Be. Back when you needed CFO approval on a bigger deal. Back when budgets, in general, were tight. Back when VPs and Directors couldn’t just buy whatever tools they wanted. Sales is hard again. Competition is intense. It was always like this, outside of the Boom.
The biggest issue, though, is how long it just got easier and easier. Now we have a whole generation of SaaS employees and execs who have only seen SaaS .. Get Easier Every Year. Each year from 2017-2021 was easier than the prior year. 2022 was harder, but it took a while to see it wasn’t transitory.
Revenue multiples for public SaaS companies in 2023, IMHO, are still too low. Interest rates aside, they shouldn’t be at 8+ year lows. But overall, this is how hard sales … is supposed to be in SaaS. Per Gartner, SaaS spend will still be up 18% in 2023. It’s still growing. But budgets were never meant to be elastic.
Those who grew up in the Boom Times honestly just order-taking in sales. CEOs who grew up with infinite capital. CS folks who phoned high NRR in. I still see many of them struggling to adjust. Because they grew up in a SaaS world where every year was easier. Not always easy. But … easier.
SaaS isn’t shrinking. Maybe it’s a recession, but the best are still growing at impressive rates, if not at the rates of Peak 2021. If it’s a recession, it’s only in the sense that for the first time … it’s all just harder. If you haven’t adjusted yet, don’t wait for a bailout. It was meant to be like this.