The “2023 Pass” is Coming to An End

"If growth was mediocre in 2022 and 2023, but you had 5+ years of cash runway? No one cared anymore"

So times haven’t been tough for everyone in SaaS the past 12-18 months.  If you were in AI, if you were in hospitality, if you were in parts of e-commerce, if you were in mobile … things mostly have been Pretty Normal:

But other segments have been hit with a sledgehammer.  In particular, folks impacted by The Great App Layoff, where 10% or more of many orgs’ app stack was cut.

Many SaaS leaders in sales and marketing spaces saw growth go from 100% to 10%, from 50% to 0%.  I do think we’re mostly over it, although Godard Abel, CEO of G2, and I had a deep dive on the topic the other day, and they aren’t quite seeing an end to the marketing slowdown yet on their side:

The biggest impact of all was to private unicorns with high burn rates that hit a wall.  That’s probably about 20%-30% of them, based on rough data I can see at SaaStr.

And so VCs went into triage mode.  All of their time got sucked up in late 2022 and 2023 on dealing with the huge bets they’d made on unicorns that looked to be potentially going under.  All of a sudden, massive changes had to be made when it was clear another round of venture capital was never coming.

And so what happened is everyone else sort of got a pass in 2023 by VCs and others.

If growth was mediocre in 2022 and 2023, but you had 5+ years of cash runway?  No one cared anymore.  VCs stopped pushing, pushing, pushing for ever higher growth, and basically left startups alone that weren’t burning much.

Net net, every VC-backed startup with mediocre growth but a low burn and a long runway got a pass in 2023.

That pass is now ending.  It’s time to grow again.

The bad news is some startups won’t readjust.  Many have settled into low or even no growth mode.  They’ve adjusted and now can stretch their cash for years.  But culturally, they aren’t really wired for growth anymore.

The good news is we’re lapping a low year in many cases.  If you grew 10% last year, it can’t be that hard to grow faster as demand reflates.  Even if demand only reflates slightly in the next 12 months in your category.

So pick up the pace.  If nothing else, commit to growing faster than the prior 12 months.  It’s OK to have a Year of Hell, many of us do.  But you have to find a way to pick yourself up after that and grow again, for real.  Some of the team may not want to.  You may need to leave them behind.

At the end of the day, SaaS spend is massive and grows every year.  If your app really matters, if it really changes the game, there will be at least more budget for it next year than last.