The 2025 SaaS Vibe Check: What Founders Need to Know Right Now with SaaStr CEO and Founder Jason Lemkin

In the latest installment of SaaStr Workshop Wednesday, SaaStr CEO and Founder Jason Lemkin did a vibe check into the state of SaaS, AI, venture funding, and the rollercoaster of building and scaling a business in 2025.

Here’s what you need to know:

5 Unexpected Learnings from the 2025 Vibe Check

1. “Growth is the New Efficiency” – But Efficiency Still Matters

• There’s a lot of talk about efficiency, but the reality is being profitable isn’t enough—companies are valued based on growth multiples, not EBITDA.

• Shopify is a prime example: it’s more profitable than ever, but what really matters is that its growth rate has accelerated.

• The market is rewarding those who scale efficiently, not just those who optimize for profitability alone.

2. AI Isn’t Just a Trend—It’s a Funding Filter

• If you’re not AI-native, fundraising is harder than ever. It’s not about just adding an “AI feature”—VCs are smart enough to see through that.

• The best AI-first companies are getting funded at insane valuations because their growth rates are unlike anything seen before.

• If your company isn’t inherently AI-driven, you need to at least be AI-curious and demonstrate how AI is shaping your category.

3. The New Divide in SaaS: “Frozen” vs. “Hyper-Growth”

• SaaS companies are either growing at breakneck speeds or completely stagnating—there’s not much in between.

• Some companies, like PagerDuty, have 0% net new customer growth and are relying on upsells and price hikes.

• Others, like Cursor or Wiz, are growing at 100M ARR in a year.

• If you’re not launching new products or expanding your market, you risk getting stuck in the frozen zone.

4. VC Games Are Changing—Playing “Too Hot” Can Kill Your Raise

• Many founders still think they need to run a super tight, fast “hot” process to get VCs excited.

• That only works if you’re an AI-native unicorn.

• If you’re not, VCs need time to evaluate deals, and being overly aggressive can actually drive them away.

• Slow it down, show thoughtful, long-term execution, and don’t try to create artificial urgency.

5. The First Sales Hire Can Make or Break Your Growth

• At $1M ARR, hiring your first AE is one of the most critical moves.

• The biggest mistake? Hiring based on resume alone.

• Instead, you need to interview 30+ people and only hire the one person YOU would buy from.

• If your first AE fails, you won’t even give them enough leads—you’ll instinctively start taking over deals again.

• Founders who get this right accelerate from $1M to $3M+ much faster. Those who get it wrong lose a year.

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The 2025 Market: Is It 2021 Again?

If you’re in tech, especially in San Francisco, it might feel like 2021 all over again—but with a twist. AI is fueling a new level of mania. Founders are everywhere. YC has multiple batches a year. There are AI events happening left and right. It’s fast, it’s furious, and if you’re not plugged in, it might feel like the world is spinning out of control.

For some, though, it’s still tough out there. Many SaaS companies are struggling after a few difficult years. Funding hasn’t dried up, but it has shifted in a big way.

Let’s break it down.

VC Funding: Follow the AI Money

Two charts from EY sum up where we are:

1. AI is dominating funding. 44% of VC investment in 2024 has gone into AI-native companies, and that percentage will likely be even higher in 2025. Investors want AI-native, generative AI, or infrastructure that supports AI’s growth. If your product isn’t fundamentally AI-driven, funding is harder than ever to secure.

2. Money is back, but only for AI and hyper-growth startups. Late-stage AI companies like OpenAI, Anthropic, and Harvey AI are absorbing massive rounds. Meanwhile, the number of venture deals has actually declined. More money is flowing into fewer, bigger deals. If you’re outside that circle, fundraising is much harder than it was in 2021.

What This Means for Founders

• If you’re an AI-first company, funding is easier—but also more competitive than ever.

• If you’re a SaaS company without an AI component, you need to find ways to integrate AI meaningfully.

• If you’re fundraising, expect a slower process, with more scrutiny unless you’re in the AI + growth quadrant.

Growth vs. Profitability: The Myth of “Efficiency”

Yes, efficiency matters. Yes, profitability is great. But growth is still king.

• Shopify just hit an $11B run rate, growing 31% YoY—its fastest growth in three years. And guess what? It’s getting more profitable while accelerating growth.

• On the other hand, PagerDuty is only growing 10% and has 0% net new customer growth. It’s relying on upsells and price hikes, but it’s not enough. That’s why it’s struggling.

The lesson? If your customer count is flat, you’re in trouble. You can raise prices, sure. You can push upmarket. But the best companies ship more and move faster. If you haven’t released game-changing features in the last 12 months, you’re falling behind.

AI and B2B: The Growth is Insane

If you think AI is hype, look at these growth rates:

• Cursor AI—$0 to $100M ARR in months.

• Deal—$800M ARR, growing 70%.

• Wiz—one of the fastest-growing startups in history.

Meanwhile, enterprise SaaS budgets overall are flat. But AI budgets are up 50%. CIOs are cutting SaaS tools left and right, but adding AI-driven solutions.

If you’re not tapping into AI budgets, you’re missing a massive opportunity.

Fundraising in 2025: What Works?

1. If You’re Not AI, Fundraising is Harder

• Assume that most investors won’t be interested if you’re not AI-first.

• If you’re in vertical SaaS, position yourself as such—VCs still love vertical SaaS (think Viva, Toast, Procore).

• If you can, add AI functionality—but don’t AI-wash. Investors are smarter than that.

2. The “One and Done” Approach to Funding

More founders are raising one round and then going as far as they can with it. Why?

• Multiple VC rounds mean massive dilution—founders often end up with 10-20% ownership at exit.

• Bootstrapping or capital-efficient growth means more control, less stress.

This doesn’t mean slow growth—but if you can fund growth with customers instead of VC money, you should seriously consider it.

3. How to Actually Raise Money in This Market

• Cold emails still work—but they need to be highly targeted. Personalize your pitch, show traction, and be clear about why you’re a fit.

• Don’t run a “hot” process if you’re not a top AI startup. Fake urgency will backfire.

• Show AI curiosity. Even if you’re not AI-native, show that you’re experimenting with it and thinking about how it impacts your category.

Sales & Marketing Playbooks Are Breaking

The old playbooks don’t work anymore.

• Outbound is failing—unless you do it right.

• Inbound is tougher—SEO is shifting, competition is insane.

• Bad sales hires kill growth—hiring the wrong first AE can set you back 12+ months.

How to Hire Sales Reps in 2025

If you’re hiring your first AE, interview 30+ candidates and only hire someone you would buy from. Background matters less.

• If you’re selling to SMBs, you need hungry, high-energy reps who love the mission.

• If you’re selling to enterprise, you need trusted advisors who understand solutions, not just features.

Final Takeaways

• Move faster. The best companies are shipping 50-100% more product every year.

• AI isn’t optional. Even if you’re not an AI company, find ways to leverage it.

• If you’re not growing, you’re dying. Adding net new customers is the only way to scale long-term.

• If you’re fundraising, be strategic. Don’t chase VCs who aren’t a fit, and don’t get caught up in trends.

Want to Pitch at SaaStr Annual?

If you have an AI-first product (or even just an AI-first feature), apply to pitch at the AI Demo Stage at SaaStr Annual 2025, May 13-15 in SF Bay!!. VCs like Mayfield are investing $500K-$5M in the best pitches. Two minutes on stage could change your company’s future.

See you there!