Is SaaS Dead? Venture Atlanta Panel Recap

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?” offered a glimpse into industry perspectives on the ever-shifting landscape of B2B SaaS. 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

Panelists expressed excitement in the opportunity of AI-enabled hardware, which can address problems that pure software solutions cannot. They 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

The intersection of financial software and health tech is a promising area, with opportunities for AI in SaaS to streamline complex tasks like insurance reconciliation and analytics. Every company should be exploring how to integrate AI into its operations to remain competitive. The panel discussed the 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

The panel advised 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."

To that point, the panel noted some 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.”

Is Now a Good Time to Start a Fintech or SaaS Company?

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. The panel advised 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:

  • They emphasized the importance of controlling burn rate, pointing out that overspending is a common mistake for startups. Avoid hiring high-level executives like CMOs or CFOs before a company has solidified its sales process. 
  • They 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.
  • They also challenged the traditional notion of "funding seasons." They offered up their spin on a classic phrase—ABR: Always Be Raising. 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.”

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. 

  • AI is undergoing a "boom-bust" cycle, and while the current boom will likely see a downturn, the technology's future is bright. Companies investing in vertical AI solutions for specific industries are more likely to succeed than those chasing generalized AI hype.
  • 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.”

Biggest Lessons Learned From Failure

The panelists shared their experiences and insights on the lessons learned from failure. 

  • Failure can often feel shameful, but it’s a normal part of the entrepreneurial journey. Keep an eye on struggling companies in your network and be open to 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.”

  • 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.
  • Forming strategic partnerships early on can be crucial, as these relationships can provide both distribution advantages and potential exit opportunities. With that, you have to balance 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:

  • For deal sourcing, always go for 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.
  • Cold outreach is another approach, especially if you like to be involved early in the process. This can be the connective tissue to other partnerships. For raising funds, panelists advised VCs to be networking all the time and putting work into relationships.
  • On the other hand, some VCs do not typically take cold emails. However, if you have a reference from an enterprise, the chance a cold approach works will be much higher. Many don’t take cold outreach because as VCs, they are testing a founder’s skills. One of those skills is networking.

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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.

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