20VC: Predictions for 2024: What Happens to Early Stage VC Funding, Do a Load of Venture Funds Die, What do LPs Do in 2024, Does Figma Kill the M&A Market, Will IPOs Comeback & What Does a Trump Administration do for Startups with Jason Lemkin @ SaaStr
Jan 4, 2024
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Jason Lemkin, a SaaS investor, discusses predictions for 2024: IPOs, early-stage VC funding, M&A market, and the impact of a Trump administration on startups. They also analyze the success of companies thriving without VC funding and the challenges faced by VCs turned founders. The chapter concludes with SASTA's goals for 2024 and gratitude towards sponsors.
The SaaS industry is facing concerns about deceleration in growth, but there is optimism for new and innovative SaaS companies in the seed stage market.
Late-stage funding market is now focused on finding decacorns and companies with the potential to reach $1 billion in revenue and achieve high returns.
There is a growing appetite for M&A activity, with companies seeking adjacent plays to enhance their product portfolios through mid-size acquisitions.
Deep dives
Concerns about the SaaS industry's growth
There are worries about the deceleration in growth and the potential permanence of this slowdown in the SaaS industry, as public SaaS companies had their slowest pace of growth ever. Some attribute this to the saturation of the SaaS market, as software spending cannot exceed GDP indefinitely. However, there is still optimism for the seed stage market, as there will always be opportunities for new and innovative SaaS companies to emerge.
The shift to decacorn hunting in late-stage funding
In the late-stage funding market, the focus has shifted towards hunting for decacorns rather than unicorns. The industry is perpetually searching for companies that have the potential to reach a billion in revenue and achieve 10x or higher returns. While there may be concerns about the ability to find enough decacorns, this mindset has become ingrained in the venture industry, resulting in a constant hunt for high-growth companies with significant potential.
Likely IPOs in 2024
Stripe and Databricks are expected to go public in 2024. While some companies may consider waiting due to current market conditions, others, like ServiceTitan, are anticipated to take the opportunity to go public this year. The attitude towards IPOs has shifted, as companies are more willing to proceed with their public offerings without waiting for market conditions to improve.
Increased interest in M&A
There is a growing appetite for M&A activity, driven by companies looking to bolt on additional products or services to expand their offerings. Rather than competing directly with others, companies are more likely to seek adjacent plays to enhance their product portfolios. This trend is expected to create opportunities for mid-size acquisitions in the range of $100 to $400 million, with a focus on non-competitive offerings that can complement existing businesses.
Venture Funding in 2024
Venture funding in 2024 will depend on the availability of capital from LPs. VCs will deploy as much capital as the markets will absorb, and the real question lies in the segment of LPs that are impacted by the lack of liquidity. Some LPs, like university endowments and family offices, have sufficient liquidity and will continue investing. Additionally, the entrance of new LPs, especially from Asia and Europe, brings significant capital into the venture space. Overall, while venture funding may not see the mass liquidity events that were hoped for, VCs will continue to find ways to deploy capital.
Outliers and Importance of Founders in Venture
Venture is a business of outliers, and founders need to understand the importance of being exceptional to attract venture capital. Pretty good founders no longer appeal to investors, and it is essential for founders to be significantly better than the investors themselves. The lesson learned is that good but not great founders do not lead to outstanding outcomes. Investors are looking for founders with a sense of urgency and dedication to bring their companies to success. The focus should be on investing in founders who have the potential for exceptional growth and can deliver high returns.
Joining Harry in the hot seat today is Jason Lemkin, Founder @ SaaStr and one of the OG SaaS investors of the last decade. The discussion today is broken into two segments:
2023: A Year in Review:
Breakout company
Best early-stage fund
Best late-stage fund
Most surprising event
Founder of the Year
2024: Predictions: What is to Come:
Does the IPO window open?
Do Stripe, Databricks, and more go public?
What happens to early-stage venture markets?
Does the growth stage come roaring back?
What happens to the M&A market?
How does Trump change the startup ecosystem?
Will a generation of young VCs be washed out the system?
Will a ton of venture firms shut down?
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