Insights into the Future of SaaS in 2024 with David Sacks

The future of SaaS in 2024 holds challenges for startups and investors as attrition rates rise and valuations decrease. AI and efficiency are key focuses for success.

00:00:00 The future of SaaS in 2024 is discussed with David Sacks, Founder & General Partner of Craft Ventures. AI is a major focus, with opportunities in infrastructure, co-pilots for professional jobs, and AI functionality for pre-ai SAS apps.

The future of SaaS in 2024 is heavily focused on AI technology.

Craft Ventures, with assets under management of 3.3 billion, is predominantly investing in AI-driven B2B startups.

There are three categories of AI opportunities: infrastructure, co-pilots for professional job categories, and pre-AI SaaS apps that can be enhanced with AI functionality.

00:06:08 The future of SaaS in 2024 holds challenges for investors in seed funding as attrition rates rise. Series A and Series B investments may offer better opportunities. The correction in valuations began in late-stage funding due to decreased liquidity.

πŸ“ˆ The financial markets peaked in November 2021 and started declining in Q2 2022 due to the Fed's policy.

πŸ’Ό Venture capital firms are expecting to do one and a half big deals per quarter and a couple of seed deals per quarter.

πŸ’° The mortality rate for seed rounds is currently high, around 80%, making it tough for investors.

πŸ’‘ Investors are becoming more skeptical and are willing to pay less for incremental proof before investing.

πŸ“‰ The correction in valuations started with late-stage rounds due to liquidity drying up in the market.

00:12:16 The future of SaaS in 2024 is uncertain due to the challenges faced by startups in lower funding rounds and the complexities of hybrid software businesses with physical components.

πŸ“Œ Seed funding landscape is still not fully corrected, especially for successful founders.

πŸ” Low-margin SaaS businesses and tech-enabled businesses with physical components have faced challenges.

πŸ’° Software startups have forgiving operational efficiency, while businesses with physical components require extensive operational expertise.

00:18:24 A discussion about the future of SaaS and its current state. Some companies are recovering while others are facing challenges due to reductions in seats and increased competition in software categories.

πŸ“Š The SaaS industry has experienced a recovery in both public and private markets, indicating a bottoming out.

⏳ Although there are signs of improvement, many companies still face deferred pain and financial challenges that may lead to restructuring or running out of funds.

πŸ’Ό Startups in the SaaS space are facing seat contractions and a merging of categories, leading to a more discriminating buyer base focused on cost-cutting.

00:24:33 David Sacks discusses the current state of the software industry and predicts a gradual recovery. He emphasizes that the downturn is an opportunity for startups to recruit talent and face less competition. Sacks also highlights the importance of building companies during downturns for long-term success.

πŸ“Š The software industry has experienced a recession over the past year or two, but there are signs of improvement in recent weeks.

πŸ’Ό It is unlikely that the software industry will return to its peak in 2021, as the bubble was similar to the dot-com bubble in 1999.

πŸš€ Despite the challenges, software remains an integral part of the economy and will continue to grow, especially with advancements in AI and new platforms.

00:30:41 The future of SaaS in 2024 is focused on burn multiple and capital efficiency. Startups need to track their burn divided by net new ARR to assess efficiency. Early stage startups may have a high burn multiple, while late stage and public companies aim for a lower burn multiple.

πŸ”₯ Founders need to be cautious about burning through too much capital without a solid plan.

πŸ’° Startups should focus on capital efficiency and consider their burn multiple as a measure of efficiency.

πŸ“ˆ The burn multiple should decrease over time as the company matures and becomes more efficient.

00:36:48 Discover the future of SaaS in 2024 with David Sacks, Founder & General Partner, Craft Ventures. A new dashboarding tool for SAS startups has been launched, providing convenience and value in analyzing metrics and saving time.

πŸ’‘ It is important for SaaS startups to maintain a low burn multiple during a tough period to increase the chances of success.

πŸ“Š SAS Grid is a dashboarding tool specifically designed for SAS companies that automates the calculation of metrics and eliminates the need for a dedicated data analytics team.

πŸ‘¨β€πŸ’Ό SAS Grid, founded by David Sacks and Ethan Ruby, provides convenience and value to SAS companies by offering a verticalized business intelligence tool.

Summary of a video "What the Future of SaaS Holds for 2024 with David Sacks, Founder & General Partner, Craft Ventures" by SaaStr on YouTube.

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