SaaStr on 20VC: “What’s Really Happening in Venture Today: Hard Truths on AI Investing, Fund Sizes, and Why “Seed is for Suckers”
"The hard truth? Great companies have zero incentive to go public today."
So Harry Stebbings was kind enough to invite us back to 20VC to do a deep dive together with OG SaaS investor Rory O’Driscoll of Scale. Rory and his partners have been early investors in HubSpot, DocuSign, Box and so many other B2B leaders.
It was truly a great deep dive on how VC really works today, what’s getting funded, and why. And how the game has changed.
The Panel
Jason Lemkin – Founder of SaaStr, former CEO and co-founder of EchoSign (acquired by Adobe), and cloud VC. Jason has invested in Algolia, Pipedrive, Talkdesk, Owner, Gorgias, RevenueCat and many other successful SaaS companies.
Harry Stebbings – Founder of 20VC, host of The Twenty Minute VC podcast, and founder of Stride.VC. Harry has built one of the most influential platforms in venture capital through his podcast interviews with top investors and founders.
Rory O’Driscoll – Founding partner at Scale Venture Partners with over 25 years of experience investing in software companies. Rory has led investments in companies like Box, DocuSign, and has a reputation for his deep understanding of SaaS metrics and business models.
4 Unexpected Learnings
Product-market fit can disappear in weeks, not years – In AI companies, PMF is incredibly transient, with companies gaining and losing it 2-3 times in a two-year period.
“Seed is for suckers” – When outcomes are measured in tens of billions, writing one big check into a winner and achieving liquidity in a quarter of the time can produce higher absolute returns than seed investing.
PE firms won’t save struggling SaaS companies – They hate broad horizontal market SaaS companies without pricing power and prefer niche vertical software with market dominance.
The best strategy may be the Thrive/Monopoly approach – Buy the best property on every key block (fintech, AI, infrastructure) and just wait for the checks to roll in.
The venture landscape is dramatically changing, with VCs placing bigger bets at higher valuations than ever before. Here’s what these top minds in venture think about it all.
Why SaaS Metrics Matter Less Than Ever
Remember when I used to say “1 to 10 in 5 quarters or less is S-tier”? That metric guided investments for years.
But here’s the brutal truth: in AI, PMF can be gained and lost multiple times in a two-year period.
“It used to take you five years to fall out of product market fit, now it can be five weeks,” says Harry Stebbings. “And that’s not just a catchphrase – that’s literal.”
In the old SaaS playbook, you’d hit product-market fit and have a decent team, and you could count on a 5-year run. You’d have to reinvent around year 4-5, but you had runway.
You can’t count on any of that today.
Why? Two key factors:
Model progress at a very deep level constantly changes what’s possible
We’re still figuring out what AI can do – we’re in an exploratory phase
The Hard Truth About Venture Risk Today
If product-market fit is transient and revenues are highly unpredictable as we’re seeing with Gen AI companies (scaling to $20-50M very quickly but potentially with sugar highs), what are VCs actually underwriting?
“If you’re not understanding that you’re taking on more risk, you’re missing the movie,” Harry explains. “You know less at every stage on every check you’re writing today than you would have known 10 years ago at a similar stage SaaS company. A lot less.”
But there’s a flip side – the upside potential is massive.
This creates a terrifying paradox: writing checks today means knowing far less while paying far more. The upside might be incredible, but we’ve seen companies fall off growth tracks in just six months.
“It’s a very scary time to play the game today.”
Will Private Equity Save SaaS Companies?
There’s a $2-3 trillion problem in venture today: thousands of SaaS companies that have slowed from exceptional growth rates and are now doing $50M growing at 10-20%, or $100M growing at 8-9%.
These companies don’t have the trajectory for an IPO but still have meaningful value.
The bad news? PE firms hate exactly the kinds of companies VCs love to fund.
PE loves “boring software companies in tiny verticals with 40% market share where they can screw customers for five years by raising prices.”
But VCs fund “broad horizontal markets where you can compete for a billion-dollar outcome.”
When those companies fail to hit the billion-dollar outcome, you’re left with subscale businesses without pricing power. PE buyers look at these and say: “I can’t take 30% of costs out, raise prices, and get the same thing.”
Why Seed Investing Is For Suckers (In a $20B Fund World)
When a16z announces a $20B fund and Founders Fund raises $4.6B, what’s happening to venture?
Here’s the cold, hard truth: “Why struggle to pretend you can do 8x over 20 years on a seed fund when you can just write one big check into a winner and call it a day?”
The math is brutal. The multiple will be lower, but the absolute return will be higher.
As Rory put it: “Like it’s so stupid. When outcomes are $100+ billion, seed is for suckers.”
Josh Kushner’s Thrive Capital strategy proves this point. “Buy the best property on every block – it’s like Monopoly.” He bought the best house on the fintech block (Stripe), the OpenAI block, and the infrastructure block (Databricks).
“Then you just go home when you’re done and wait for the checks to roll in. It’s genius.”
The Future of IPOs (Spoiler: It’s Grim for Many)
The hard truth? Great companies have zero incentive to go public today.
“I was with one of the most successful founders recently,” Harry shares, “and he said ‘Literally there is no significant reason for any great company to go public today.'”
When you can raise endless money at great prices with private investors and no scrutiny, why endure the pain of being public?
This creates a bizarre reality where the capital markets are completely inverted. It’s becoming cheaper for private companies to raise from providers with 500bps cost structures than from public mutual funds with 70bps structures.
“It’s intellectually madness, but it’s where we are.”
Final Thoughts: The New Venture Game
The rules have changed. We’re all taking more risk than 10-15 years ago in almost every dimension.
Higher prices
Less predictable product-market fit
More concentration risk
Longer holding periods
Bigger funds
The new playbook seems to be: go big or go home. Seed may be for suckers when the outcomes are measured in tens of billions. For the mega-funds, concentration in a few monster winners trumps portfolio diversification.
It’s a higher-stakes game with potentially bigger returns, but also with many more ways to fail spectacularly.
5 Things to Know About VC in 2025
Mega-funds are the new normal – With a16z at $20B and Founders Fund at $4.6B, capital is concentrating in fewer hands that can write massive checks.
The IPO market remains frozen – Great companies have zero incentive to go public when they can raise endless money privately with no scrutiny.
Success is more binary than ever – Expect dramatically more fund variance, with the winners taking the lion’s share of returns.
AI rounds are priced for perfection – Valuations assume huge outcomes, leaving little room for error or timeline extensions.
Traditional SaaS investing is deeply challenged – There’s $2-3 trillion of private SaaS assets without a clear path to liquidity as growth rates decline below IPO thresholds.
Welcome to venture in 2025.