How to Invest in SaaS Companies for Maximum Profit

Name: How to Invest in SaaS Companies for Maximum Profit
Uploaded: 2024-05-02T13:04:18+00:00
Duration: 35 s
Channel: Jason M. Lemkin
Description: In this excerpt from a YouTube discussion, Jason M. Lemkin advises investors to adopt a meta‑learning approach that de‑emphasizes market multiples and…

2 May 2024 · 1 min

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In this excerpt from a YouTube discussion, Jason M. Lemkin advises investors to adopt a meta‑learning approach that de‑emphasizes market multiples and instead concentrates on the fundamentals of SaaS companies. He stresses that exits (M&A or IPO) typically take around ten years, during which market conditions will shift dramatically, making multiples unreliable. Lemkin highlights the importance of understanding follow‑on capital needs and burn rates, and recommends investing in post‑revenue SaaS businesses that have achieved early traction—specifically those generating $20K–$40K in monthly revenue, with a founder still leading sales. The conversation underscores a pragmatic, data‑driven investment mindset that values tangible operational metrics over macro‑level market speculation.

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But I think the meta-learning is just like, get into winners and just don't worry about the stock market. Don't worry about multiples because you can't control it. And it's going to change so many times. Like, it takes 10 years to get a billion-dollar exit, like M&A. IPO can vary. It's 10 years for— so the market's going to change a lot in 10 billion, right? You don't even need to look other than to understand follow-on capital and burn rates. Just do it. But I do think— I know people disagree. I do think if you're able to invest post-revenue in SaaS, Um, you, you can, you know, you know it's going to be going to do reasonably well, and you also know it's probably going to have a crap year in there.
I think me and you, oh, I don't know, I, I speak for myself here, I definitely have a sweet spot of, I like, like post-product, $20 to $40K in revenue, you have some customers, you have some data, the founder's probably still leading the sales process, but there's something there, there's that seedling of goodness.
You know what the truth