Is SaaS Dead? | SaaStr

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Signs of Malaise in the SaaS World

There’s a bit of a malaise hanging over the SaaS world today, obscured somewhat by AI excitement. However, it’s still palpable.

A feeling that:

• Growth has slowed down everywhere, with the average public SaaS company now growing less than 20% a year.
• Sales are becoming more challenging, and the traditional playbooks are not as effective.
• There’s a reluctance to put in the same level of effort as before.
• There are more competitors than ever in the market.
• Intense competition among leaders, with each trying to outperform the other (e.g., Gong vs. Outreach vs. Salesloft vs. Zoom).
• Layoffs have become normalized in the industry.
• Customers are discontented due to endless price hikes and upsells.
• Budgets are being slashed to accommodate investments in AI.
• Renewals are not just a challenge but often result in downgrades.
• Profitability is now the top priority.
• VC interest in non-AI SaaS companies has waned.
• A sense of being in a prolonged “downturn” despite the robust state of the U.S. economy.
• Products are struggling to maintain product-market fit, shifting from “must-haves” to “nice-to-haves.”
• Even loyal customers are scrutinizing their budgets more rigorously than before.
• Happy customers are churning due to the need to cut down on apps.
• A prevailing belief that things may not improve or get easier in the SaaS industry.

The list goes on.

Understanding the Prolonged Downturn in SaaS

Learn more about the downturn and its impact

The current downturn in SaaS is notably prolonged, spanning almost three years. In comparison, previous downturns like the ones in 2008 and 2016 were shorter in duration. The extended nature of this downturn has contributed significantly to the prevailing malaise in the industry.

Explore the impact of revenue multiples on industry dynamics

Strategies for Overcoming the Malaise

Addressing the challenges in the SaaS industry requires a strategic approach to drive growth and innovation. Key recommendations include:

• Focus on driving true efficiency gains for customers. Prove the real value of your product by delivering tangible efficiency improvements.
• Stay competitive in AI. Ensure that your offerings are on par with or better than the competition in terms of AI capabilities.
• Prioritize customer acquisition. Invest in acquiring new customers and ensuring their satisfaction for long-term success.
• Grow usage metrics faster than revenue. Monitor key usage metrics and ensure they outpace revenue growth for a sustainable future.

While the current landscape may pose challenges, there are opportunities for growth and evolution in the SaaS industry. By focusing on efficiency, innovation, and customer satisfaction, companies can navigate through the malaise and emerge stronger.