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My pet theory is that the rise of SaaS in the 2010s is largely a function of the low prevailing interest rates. Standard pricing says that if interest rates are
by karatinversion 4y ago
My pet theory is that the rise of SaaS in the 2010s is largely a function of the low prevailing interest rates. Standard pricing says that if interest rates are 0.5%, an annual recurring payment of $100 is worth $20,000; but if interest rates are 5%, like in the 90’s, it is only worth $2,000. With the fed increasing rates, maybe we’ll see a return to pay-once software?
- benlumen 4y agoAre you saying that because for the SaaS company, $100 in income can service $20,000 in debt?
- karatinversion 4y agoThat’s one way of looking at it. From the investor (and thus valuation) point of view, you need to pay $20,000 lump sum to obtain a recurring interest payment of $100.