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A number of SaaS vendors have had massive cancellations because of the pandemic related downturn. This will require a revisit to the valuation logic as there is

A number of SaaS vendors have had massive cancellations because of the pandemic related downturn. This will require a revisit to the valuation logic as there is no more “recurring” when your clients go bankrupt or downscale. All the obvious vertical plays have been hit tremendously like Tripactions (no more business trips). But even horizontal plays like HR SaaS companies like Namely have been hit big time by bankruptcies and downsizing. I wonder if there will be a revisit to the MRR or ARR pricing model, and thus the valuation model as well.

socalnate1 6y ago
I doubt it. The alternative is selling software for a high one time license fee, and that's even harder right now. (i.e. Those clients going bankrupt aren't buying anything from anyone, it's not about the specific model).
jandrewrogers 6y ago
I think the valuation model includes revenue risk. An investor will be looking at this from a portfolio perspective, where diversified SaaS holdings should in aggregate generate relatively predictable revenue.
warent 6y ago
I'm guessing we'll see a lot more linear growth, bootstrapped products rather than the incessant swarm of bogus "moonshot companies" seeking a hockeystick chart. I run a SaaS business by myself and it's more profitable than ever.
- drusepth 6y ago
  I'd be curious whether the cancellations of SaaS companies relates more to the pricing model (just being SaaS) or the industry/product. Companies like TripAction and Namely feel like they'd be hit by a pandemic regardless of whether they're SaaS or not. I also run a bootstrapped SaaS worldbuilding business that has more churn than usual right now, but it's overshadowed by a big boost in activity and new subscribers that still put me net "up" -- assumedly because more people are inside right now, spending more time online, have more time to find and explore new things online, are organically sharing more things with their friends, and/or looking for new ways to feel productive. Feels like the biggest reason someone would cancel their SaaS subscriptions right now is losing expendable income -- but that's not going to help them with much larger, one-off purchases of software either. I'd expect a small resurgence of "buy this software" startups after recovering a bit, but I don't expect them to last long for a lot of the same reasons they didn't (in a general sense, across the industry) last long in the 90s. With limited income, it's a lot easier for someone to pay $5/month than $50 up front, especially when you're not sure you're going to love a piece of software enough to still be using it in 10 months.

socalnate1 6y ago

I doubt it. The alternative is selling software for a high one time license fee, and that's even harder right now. (i.e. Those clients going bankrupt aren't buying anything from anyone, it's not about the specific model).

jandrewrogers 6y ago

I think the valuation model includes revenue risk. An investor will be looking at this from a portfolio perspective, where diversified SaaS holdings should in aggregate generate relatively predictable revenue.

warent 6y ago

I'm guessing we'll see a lot more linear growth, bootstrapped products rather than the incessant swarm of bogus "moonshot companies" seeking a hockeystick chart. I run a SaaS business by myself and it's more profitable than ever.

drusepth 6y ago
I'd be curious whether the cancellations of SaaS companies relates more to the pricing model (just being SaaS) or the industry/product. Companies like TripAction and Namely feel like they'd be hit by a pandemic regardless of whether they're SaaS or not. I also run a bootstrapped SaaS worldbuilding business that has more churn than usual right now, but it's overshadowed by a big boost in activity and new subscribers that still put me net "up" -- assumedly because more people are inside right now, spending more time online, have more time to find and explore new things online, are organically sharing more things with their friends, and/or looking for new ways to feel productive. Feels like the biggest reason someone would cancel their SaaS subscriptions right now is losing expendable income -- but that's not going to help them with much larger, one-off purchases of software either. I'd expect a small resurgence of "buy this software" startups after recovering a bit, but I don't expect them to last long for a lot of the same reasons they didn't (in a general sense, across the industry) last long in the 90s. With limited income, it's a lot easier for someone to pay $5/month than $50 up front, especially when you're not sure you're going to love a piece of software enough to still be using it in 10 months.