Trends & Opportunities in 2024

OpenView Capital (RIP) put out a great benchmark report on the state of the B2B SaaS world in 2023, and let's just say it was bleak.

The TL;DR is that:

  • Growth is down
  • Fundraising is much harder
  • Cost to acquire a customer (CAC) is up
  • Most companies need a path to profit soon

The graph that drives the point home is this one. The median number of employees among small ($1-$5M ARR) and medium ($5M-$20M) sized start-ups is down ~50% from 2021.

This is particularly bad for the SaaS world as:

  • Most of these companies are customers of each other - the average SaaS company is just a combination of other SaaS tools + an original feature set + a brand.
  • Most SaaS tools base their pricing on “seats” - When there are a lot fewer people working in these companies, they’ll be able to charge less and it will be harder to be profitable

This means that when one SaaS company shrinks, so will another's revenue.

To offset this increase in CAC which will likely continue into next year, companies need to:

  • Cut their own fixed costs - e.g headcount, tools, etc
  • Raise their prices - either directly raising the price, optimizing their paywall to a model where they charge more, or launching other products that they can charge for.

So to summarize, you’re going to see these B2B SaaS tools need to charge more per account and do it more efficiently via fewer people.

So What do You Do With This Information

The vast majority of this email list are folks working somewhere in the self-service revenue world, either in B2C products or on the PLG side of B2B products

While this doesn’t directly impact you, the implications of this might. I think there is a lot of opportunity that will arise here for start-ups.

1. Figure out what you can sell to companies with fewer employees

Unfortunately in times like this, everyone in a company who doesn’t directly produce revenue is at risk. This is effectively anyone who is not an engineer or a salesperson.

That, however, doesn’t mean that the needs that a company has in product marketing, finance, ops, etc go away. They just don’t want to staff a team of 4 people and a manager to do it.

This creates a big opportunity to serve these needs and do it cost-effectively.

Software tools are easier to build than ever and there are a lot of talented people who are either between jobs or happy to take on a side project.

I think we’re going to see a big rise in service agencies, lightweight tools, training products, etc

2. Exploite where larger SaaS companies are pricing themselves out of the market

In an environment where the bigger B2B companies need to be profitable and CAC is rising, they'll need to charge more per account.

You might not see them raise the prices on their pricing page, but all of these companies will figure out how to raise the amount that they bill their clients via a variety of sneaky SaaS pricing methods.

Clients, in turn, will figure this out and look to cut costs.

They used to pay $34k per year and now it's $51k. This will make them receptive to another vendor who can deliver 70% of the feature set at 40% of the cost.

Additionally, if you build a competitor in 2024, you’ll be competing with the incumbents who have a 7-10-year-old codebase that needs 100 engineers to maintain it.

You get the advantage of starting fresh knowing basically what product feature will work and building on a modern tech stack.

3. Leverage the available talent in the marketplace right now

With the amount of talented employees that are floating around the job market, you can find some seriously talented people to take on project work for you.

You might be able to have your brand refreshed by a creative director from a major ad agency, who either got let go or is looking for a side hustle. You could have a landing page built by experienced CRO folks. The talent out there is crazy right now.

I remember the years from 2017-2020 when we had to beg engineers to join Codecademy. We had fundraised a lot, had a legit mission, and a great brand name. Even with all that, Amazon/Facebook/Google could pay them 2x what we could, and it was a struggle to build out the team.

The amount of great talent you can hire part-time is the highest it's been in years and this won't last forever.

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