The first event on day one of Venture Atlanta 2024 was the 11th annual VC panel and breakfast, sponsored by CBRE, exploring the future of SaaS and focusing on emerging trends, challenges, and opportunities.
The panel, titled Is SaaS Dead? featured insights from Leura Craig of Outlander VC, Mark Suster of Upfront Ventures, and Victoria Treyger of Felicis Ventures, moderated by Lynne Laube from Valor Ventures. Here are our biggest takeaways from the session:
Trends Shaping the Future of SaaS
The panelists addressed the evolution of SaaS and its current relevance. While SaaS isn’t “dead,” it is evolving, with trends like AI, fintech, and automation driving change.
AI-Enabled Hardware Is Pushing Boundaries
Leura Craig expressed excitement about AI-enabled hardware, which she believes can address problems that pure software solutions cannot. She emphasized the need to focus on industries that haven’t yet been significantly impacted by technology, such as the industrial sector or the Department of Defense.
Fintech and SaaS Market Trends
Victoria Treyger highlighted the intersection of financial software and health tech as a promising area, noting the opportunities for AI in SaaS to streamline complex tasks like insurance reconciliation and analytics. She believes that every company should be exploring how to integrate AI into its operations to remain competitive. She sees massive opportunities for AI and automation in the healthcare back office, the office of the CFO, and the risk and compliance industry.
Building Ahead of the Trend, Not With It
Mark Suster echoed this sentiment, advising founders to think ahead rather than follow current buzzwords.
“I don’t care about what today’s trends are. You’re not going to make money playing buzzword bingo. Our job is to focus on what’s coming—not what’s trendy right now.”
– Mark Suster, Upfront Ventures
To that point, Mark talked about societal changes affecting industries in the next 5 years. There is approximately a 4.1% unemployment rate in the United States, and only 1.61 children are born per household. There needs to be 2.2 children per household to expand the U.S. economy. This demographic decline gives the U.S. fewer eligible people to provide healthcare or defend the country. To that point, automation in the healthcare, national defense, and intelligent robotics industries is crucial to keeping the U.S. economy going and providing for people as they age.
“You make money as an entrepreneur by believing and building things other people don’t believe in.”
– Mark Suster, Upfront Ventures
Is Now a Good Time to Start a Fintech or SaaS Company?
Mark added that there has never been a better time to build a fintech company than now. The problem before was that everyone built neo-banks; there wasn’t enough fundamental value in the products.
Now, 80% of fintech pitches are the same because founders are just adding OpenAI to their existing products. Mark advises doing the hard work if you’re going to build a product. It’s much easier to try and build and sell something built on top of OpenAI, but it doesn’t hold true value.
Advice to Founders: Controlling Burn, Raising Smart, and Team Diversity
During the panel, each panelist was asked to give one piece of meaningful advice for founders. Here’s what they noted:
- Victoria emphasized the importance of controlling burn rate, pointing out that overspending is a common mistake for startups. She advised against hiring high-level executives like CMOs or CFOs before a company has solidified its sales process.
- Mark underscored the need for ruthless prioritization, recommending that companies focus on a single metric that matters most to their business and pivot quickly if it’s not improving. Also, don’t over-raise. More money at a higher price does not mean you have a better business.
- Leura, on the other hand, challenged the traditional notion of “funding seasons.” Her motto? ABR: Always Be Raising. She argued that founders should always be networking and building relationships with venture capitalists, rather than waiting for the “right time” to raise capital.
“If an investor gets it wrong and you suck, they’ve got 39 other companies to fall back on. But if you rush in and your investor sucks, there is no divorce. You are going to spend with someone who sucks.”
– Leura Craig, outlander VC
AI and Investment: How to Navigate the Current Landscape
When discussing AI, the panelists agreed it’s not a fleeting trend but an ongoing transformation in the tech landscape.
- Mark mentioned that AI is undergoing a “boom-bust” cycle, and while the current boom will likely see a downturn, the technology’s future is bright. He pointed out that companies investing in vertical AI solutions for specific industries are more likely to succeed than those chasing generalized AI hype.
- Victoria emphasized that integrating AI is essential for companies to maintain a competitive edge, especially for automating repetitive tasks and enhancing efficiency. But, it is getting harder to differentiate AI products and build moats. The only way you can do so is by partnering with enterprises and providing them with an incredible product, utilizing their data, and establishing a unique brand for your AI.
“Every portfolio company needs to be integrating AI into their capabilities. It’s key to maintaining their workforce, gaining efficiencies, and ultimately generating more profit.”
– Victoria Treyger, Felicis Ventures
Biggest Lessons Learned From Failure
The panelists shared their experiences and insights on the lessons learned from failure.
- Mark noted that failure often feels shameful, but it’s a normal part of the entrepreneurial journey. He advised keeping an eye on struggling companies in one’s network and offering support. But, be realistic about your burn. When you cut costs early, you have a lot more potential for success.
“Don’t hire short people if you’re short. Don’t hire tall people if you’re tall. I use it as a metaphor. Everyone likes to hire people like them. The best teams are actually built with diversity.”
– Mark Suster, Upfront Ventures
- Leura pointed out that the #1 reason businesses fail is because people quit. Most failure comes from people not being up to the task. To be successful, you have to dig deep in year three, in year six, and in year nine to find that extra gear again and again. All successful companies have multiple points of almost critical failure.
- Victoria added that forming strategic partnerships early on can be crucial, as these relationships can provide both distribution advantages and potential exit opportunities. She also emphasized balancing the fine line between being transparent about the state of your business and motivating your employees. That being said, you should always tell the truth and be transparent to investors.
How to Meet Founders and Source Deals
One question the panel was asked about focused on how founders should approach VC investors. Here are their responses:
- Victoria said that for deal sourcing, she requires a warm intro. Most VCs have a research function to find founders. But, if you’re a founder, target your approach. Look at the content the VC firm is producing and make sure you’re a fit before cold messaging them. And, personalize the message.
- Leura says that her firm mostly does cold outreach because they are involved so early in the process. They want to be that connective tissue to other partnerships. For raising funds, she advises networking all the time and putting work into relationships.
- Mark, however, does not take cold emails. He says though, if you have a reference from an enterprise, the chance a cold approach works will be much higher. The reason he doesn’t take cold outreach is because as VCs, they are testing a founder’s skills. One of those skills he needs to see from you is networking, which is why he prefers that over cold calls or emails.
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Frequently Asked Questions
What does “Is SaaS Dead?” mean in the context of today’s tech landscape?
In today’s tech ecosystem, the death of SaaS looms ahead as AI tools become more prevalent in organizational workflows. SaaS is not dying though. It is changing to integrate better with AI, fintech, healthcare, and underserved sectors such as the industrial industry and the Department of Defense.
What are the biggest trends impacting SaaS today?
The biggest SaaS market trends are AI enablement, moving SaaS to underserved verticals, and the convergence of SaaS and fintech.
How can startups leverage AI in their SaaS models?
Startups can leverage AI in their SaaS models to enhance functionality, optimize processes, and create competitive advantages. Here are several ways AI can be effectively integrated into SaaS offerings:
1. Automating Repetitive Tasks
AI can handle mundane and repetitive tasks, freeing up time for teams to focus on more strategic activities.
2. Personalizing User Experiences
AI algorithms can analyze user behavior and preferences to offer tailored experiences. In SaaS products, this could mean personalizing content recommendations, customizing dashboard views, or adjusting user interfaces based on individual usage patterns.
3. Enhancing Data Analytics and Insights
AI can process large volumes of data much faster than traditional methods, providing more accurate insights and predictive analytics. Startups can use AI-driven analytics to forecast customer behavior, detect anomalies, and identify trends.
4. Automating Customer Support and Engagement
AI-powered chatbots and virtual assistants can enhance customer support by resolving common queries, directing customers to relevant resources, or even predicting issues before they arise. This reduces the load on support teams while providing timely and consistent customer service.
What are the risks of building a SaaS company today?
Building a SaaS company today presents unique risks that entrepreneurs need to navigate carefully. Here are some of the key risks and challenges:
1. Market Saturation
SaaS market trends show that the industry has become highly competitive, with many companies offering similar solutions.
2. Customer Acquisition Costs (CAC)
With increased competition, the cost of acquiring customers has risen significantly. Paid marketing, sales resources, and promotional efforts can quickly drain budgets, making it essential to optimize CAC.
3. Churn and Retention Challenges
SaaS market trends show that customer churn remains a major issue for SaaS companies, as subscription-based models rely on consistent revenue streams. If users don’t see ongoing value, they may cancel their subscriptions, leading to revenue loss.
4. Pricing Pressure
The SaaS market is known for price sensitivity. Competitors may lower prices to attract customers, forcing companies to match or reduce their own pricing, which can impact profitability.
5. Data Security and Compliance
SaaS companies often handle sensitive customer data, which brings significant legal and regulatory requirements. Ensuring compliance with data protection regulations (e.g., GDPR, CCPA) and safeguarding against data breaches is critical.
