SaaStr 746: What’s Really Happening in Venture Capital Today with Redpoint Ventures Managing Director Logan Bartlett
Jul 3, 2024
auto_awesome
Redpoint Ventures Managing Director Logan Bartlett discusses the current state of the venture capital market, contrasting companies with ample funding to those struggling. Highlights include valuation multiples, growth vs. profitability, AI companies' allure, and market reactivation dynamics.
The software industry is experiencing disparities in funding, with some companies oversubscribed while others struggle to raise capital.
AI-oriented businesses are commanding premium valuations due to rapid growth projections and increased investments in the market.
Software companies face challenges in selling, particularly with seat-based pricing models impacting net new revenue numbers.
Deep dives
Market Overview and Trends from Redpoint Ventures
Logan Bartlett from Redpoint Ventures presents a state of the market report annually to discuss the venture capital landscape, market trends, and portfolio performance. The market went through a pullback in early 2023 leading to a tale of two markets in 2024. The NASDAQ hit an all-time high, driven by the Magnificent Seven tech companies. However, the premium for cloud stocks compared to NASDAQ has inverted, indicating challenges and changing valuations in the software industry.
Private Company Scenarios
In the private markets, companies are experiencing varied outcomes. Some firms are delaying subsequent financing rounds and focusing on growing through reduced valuations, while others are facing down rounds to adjust expectations. Unfortunately, some businesses are shutting down or selling below previous valuation levels. The time between funding rounds for companies is increasing, reflecting efforts to grow into prior valuations despite market challenges.
Impact of AI and Non-AI Businesses
AI-oriented businesses are commanding a significant premium in the market, driven by their rapid growth projections and increased capital investments. Notably, AI companies are performing at higher growth rates compared to non-AI businesses, reinforcing their valuation premiums. However, the market is seeing a shift in enthusiasm from AI companies to other sectors, indicating a dynamic landscape in the tech industry.
Challenges in Software Selling and Market Stabilization
There are challenges in software selling, particularly for companies relying on seat-based pricing models. Companies are finding it harder to justify increased seat licenses, impacting net new revenue numbers. Despite some optimistic data reflecting signs of market stabilization in software sales, certain sectors like cybersecurity and AI are demonstrating consistent growth. The industry is witnessing a shift towards stable valuations and an uptick in market activity, driven by quality names returning to the market.
VC Perspectives and Market Dynamics
Venture capitalists are cautiously optimistic about the software market, anticipating a normalization between software and broader market valuations. Investors prioritize consistent growth and performance in assessing software companies. Market dynamics indicate a reverse trend of capital deployment by firms with significant funding, influencing the disparity between public and private market valuations. Market participants are observing a convergence of valuations and a strategic focus on growing quality businesses amidst evolving market conditions.
SaaStr 746: What’s Really Happening in Venture Capital Today with Redpoint Ventures Managing Director Logan Bartlett
There are a lot of haves and have-nots in the software industry today. Some companies have more people throwing money at them than they know what to do with, and others are struggling to raise any money at all.
Logan Bartlett, Managing Director at Redpoint Ventures, shares their yearly “State of the Market” report to understand what is and isn’t happening in venture capital today. 2024 is the tale of two markets, so let’s get into some of the data on today's episode.
SaaStr hosts the largest SaaS community events on the planet.
Join us in 2024 at:
SaaStr Annual: Sept. 10-12 in the SF Bay Area. Join 12,500 SaaS professionals, CEOs, revenue leaders and investors for the world's LARGEST SaaS community event of the year. Podcast listeners can grab a discount on tickets here: https://www.saastrannual2024.com/buy-tickets?promo=fave20
--------------
This episode is sponsored by Pendo, the all-in-one product experience platform.
Pendo helps your users do the things you really want them to do. You can try Pendo for free at Pendo.io/saastr and check out Mind The Product, the community for product people like… us.
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode