The Long ViewThe Single-Product Ceiling
While single-product, linear software businesses have worked great for the last ten years, the twin tailwinds of cloud transition and low interest rates are exposing weaknesses in the model. By understanding what limits most single-product software businesses, we can see hints of what will solve the current problems.
Huge thanks to Kevin Salimian and Lone Pine Capital for their data contributions for this series, and to Nick Mehta (CEO, Gainsight) for sharing his wisdom and reviewing this piece.
Most software startups are single-product, linear businesses. They find product market fit, scale sales and marketing to grow the business, and are off to the races. While these businesses worked great for the last ten years, powered by the twin tailwinds of cloud transition and low-interest rates, the inherent weakness in the model is becoming painfully and rapidly apparent. Multiples are being crushed, and companies are struggling to grow as they once did.
In our opinion, there are three things limiting most software businesses that our new environment makes apparent. By understanding these, we can see hints of what will solve the current problems.
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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