SaaS Thoughts (October)

I spent the earlier part of my career in recurring revenue / SaaS venture-backed, etc… I see posts on here every day doubling down on the feel-good exhortations of unprofitable growth. And then I see the layoffs.

It may be old school to say supply creates its own demand (1820s old school, say), but the venture industry is supply-driven; first by ERISA easing in the 70s, followed by the unprecedented monetary boom since the 80s, only accelerating since 2008. It’s the reason why the coffee shop on my corner is venture-backed. I certainly didn’t ask for that.

Scale is a product of capital — not of latent demand.

So what do capital supply shocks mean for digital businesses pursuing scale? It means learn to survive — to truly survive, as a business — to recognize that competition means zero sum and correlated outcomes mean mutually assured destruction.

B2B venture-back firms have played a game of hungry hungry hippos where it keeps raining bananas and there’s always enough to keep everyone fed. Not the case anymore, no more banana rain means starving primates. Now that’s a correlated outcome — what goes up must come down.

To go back to Porter, and competitive business dogma, profits are proof of market differentiation. Profitability is the only answer, and the only way to survive. And for all the talk about culture and people — the Fed is always willing to throw its employment mandate for price stability. Profits are going to eat culture for breakfast.

#b2b #culture #coffee#ZEROSUM #venturecapital#interestrates #saas