The Long ViewPlatforms of Compounding Greatness
SaaS is not only evolving—it’s also expanding, to bigger TAMs and stronger business models, right before our eyes. We believe there’s an opportunity for SaaS companies to create products that work better together. We call these Platforms of Compounding Greatness (“PCG”).
Huge thanks to Kevin Salimian and Lone Pine Capital for their data contributions for this series!
As early as 2018, pundits were incorrectly pontificating that SaaS was dead. With the (justified) valuation correction of 2022, people are once again saying that SaaS has reached the end of its investment value. Investors are now ready to move on to Crypto—oh wait, sorry, now it's Generative AI (couldn’t resist the dunk, we’re actually believers), to seek out returns.
These people are simultaneously right and wrong. SaaS, as we know it, is dead. The single-point solution companies, hooked to a never-ending sales and marketing dollars treadmill, are doomed. These businesses are linear: to grow, a company must stuff in as many salespeople and marketing dollars as possible. SaaS companies that remain point solutions will eventually be subject to a brutal tradeoff between growth and profitability, and will require excess capital to grow. In good times, party on! In 2023, when capital costs are high, these companies are hitting a wall.
At Tidemark, we try to open-source our thinking as much as possible to help founders win; however, as investors, we can’t give everything away in public. If you’re an operator or founder, you can request access to the rest of this piece below.
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