Episode Summary
Executive Summary: Jason Lemkin frames 2024 as a pivotal reset for SaaS and venture: public SaaS growth has slowed to potentially permanent maturity, late-stage investors are more cautious, and founders should consider going public or selling when conditions are good. He celebrates outlier companies and founders, warns against “pretty good” teams, and argues venture is now permanently a decacorn-hunting business.
Main Topics: 2023 SaaS winners and standout companies (Priority: 5/5): Jason highlights OpenAI, Midjourney, and HubSpot as the biggest success stories, emphasizing generational growth, capital efficiency, and long-term execution. He especially praises HubSpot’s second act in CRM. Founder quality and urgency (Priority: 5/5): He argues that great outcomes require exceptional founders, not merely good ones, and says urgency is essential. He contrasts truly driven founders with comfortable or complacent operators. Public SaaS slowdown and efficiency reset (Priority: 5/5): The discussion centers on the sharp drop in public SaaS growth, rising efficiency, and the possibility that software spend has matured. Jason says cost-cutting and price increases drove 2023, but growth is the missing piece for 2024. IPO window and exit timing (Priority: 4/5): Jason believes 2024 may be a 'you might as well go public' year for mature companies like Stripe and ServiceTitan, though he later tempers that to maybe 2025. He warns founders to take good offers when they appear. M&A and late-stage caution (Priority: 4/5): He expects M&A to pick up through bolt-on acquisitions and sees late-stage investors as highly conservative, often refusing follow-ons or pro rata in 2023 due to reserve constraints and fear of weak exits. Venture economics and LP dynamics (Priority: 4/5): Jason says VC performance is still driven by outlier outcomes, DPI, and differentiation. He discusses how LP liquidity stress, new global capital, and the need for realized returns shape fund-raising and deployment. Behavioral lessons from 2021-2023 (Priority: 4/5): He criticizes founder greed and investor complacency during the boom, argues both sides misbehaved when capital was abundant, and says many 'good but not great' investments should be aggressively written down.
Key Arguments: OpenAI and Midjourney represent different kinds of greatness: OpenAI is a capital-intensive generational growth story, while Midjourney is more impressive because it achieved huge ARR with little or no funding. HubSpot is one of the best company stories in SaaS because it successfully reinvented itself from blogging/marketing software into a major CRM competitor after years of long-term commitment. The best founders are marked by urgency, honesty about mistakes, and a willingness to go long; 'pretty good' founders usually do not generate venture-scale returns. Public SaaS growth in 2023 was weak, and the improvement in stock prices came from efficiency, price increases, and contract changes rather than genuine new-logo growth. The industry may have hit SaaS spend saturation: enterprise software cannot outgrow GDP forever, and AI budgets are not yet clearly funded inside enterprises. Venture is now structurally a decacorn-hunting business post-2021; Series A and beyond increasingly needs huge outcomes to make funds work. 2024/2025 may be an IPO re-opening period for mature, cash-flow-positive companies, because at some point public markets will stop waiting and companies will 'grow up' and list. M&A should rebound through adjacency deals and tuck-ins because companies need external growth after internal efficiency gains have run out. Large funds are becoming too conservative by skipping pro rata/support checks, which weakens their ability to support winners and distorts reserve strategy. LPs ultimately care about realized distributions and differentiated managers; funds must show DPI or a defensible edge to keep raising capital.
Data Points: OpenAI estimated run-rate revenue: $1.4B - Jason cites The Information’s estimate for year-end 2023 run-rate revenue. OpenAI revenue growth assumption: $100M to $1.4B - Illustrative growth trajectory used to emphasize extreme scale-up. OpenAI valuation/tender milestones: $20B, then $80B, then $100B - Jason references successive valuation/tender levels as evidence of absurd but real growth. Midjourney ARR: ~$200M ARR - Cited as an impressive bootstrapped or minimally funded alternative to OpenAI. HubSpot CRM revenue: ~$700M - Used to show the success of HubSpot’s second act in CRM. Public SaaS average stock return in 2023: +41% - Despite growth slowdown, public SaaS equities rose strongly. Average public SaaS growth in 2023: 16% - Jason calls this the slowest pace ever for public SaaS. SaaS growth slowdown: All-time lows in 2023 - He argues growth rates hit historic lows even as companies became more efficient. Customer acquisition cost (TACs): Highest in his founder lifetime - He says it cost the most ever to acquire customers in 2023. SaaS spending forecast: $1T enterprise SaaS spend - He cites Gartner to argue the market may be approaching saturation. ServiceTitan revenue: ~$600M ARR - Used as a mature IPO candidate example. ServiceTitan customer count: 12,000 customers - Supports the maturity and scale of the business. ServiceTitan NRR: Triple-digit NRR - Highlighted as unusual for SMB/vertical SaaS with low ACV. Late-stage valuation threshold for active investing: Up to ~$200M - Jason says aggressive growth investors were largely active below this level in 2023. Typical IPO valuation expectation in examples: 4x-5x revenue - He says many founders/investors don’t want to IPO at these multiples, but may have to. Strike/Databricks-style IPO timing reference: 2024 or 2025 - He frames these as likely public-market candidates depending on conditions. LP/VC fund return example: 3x gross over 10 years - Used in a hypothetical to explain that even decent gross returns may not be enough on large funds. Reserve model stress: 1,000 unicorns / 200 die / 100 breakout - He uses this rough framework to explain reserve pressure from the 2021 boom. SASTR annual attendance: 12,000 people - Demonstrates the scale of his community and events business. CEO share at SASTR Annual: ~40% CEOs - Highlights the value of the event as a marketplace for hard-to-reach buyers.
Pivotal Quotes: "I've been doing SaaS since 2005, and this is the first year I'm worried." — Jason Lemkin: His opening thesis on structural concern about SaaS maturity and slowdown. "I think 2024 is the year of you might as well go public." — Jason Lemkin: His core view on IPO timing for mature private companies. "I will only invest in founders that are much better than me." — Jason Lemkin: His post-2023 shift toward demanding exceptional founder quality.
Implications: Founders should prioritize urgency, realism, and timing; investors should focus on outliers, support true winners, and stop underwriting average teams. SaaS growth may be structurally slower, so IPOs and M&A could become more important paths to liquidity.