SaaS Downturn: Brian Halligan's Insights

Name: SaaS Downturn: Brian Halligan's Insights
Uploaded: 2024-12-31T13:01:30+00:00
Duration: 43 s
Channel: Jason M. Lemkin
Description: In this interview, Brian Halligan—co‑founder and chairman of HubSpot, and a partner at Sequoia Growth and Propeller VC—discusses the recent SaaS market…

31 Dec 2024 · 1 min

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In this interview, Brian Halligan—co‑founder and chairman of HubSpot, and a partner at Sequoia Growth and Propeller VC—discusses the recent SaaS market cycle. He notes that the sector entered a downturn sometime before 2024, hitting a low point before rebounding in Q3 2024, with Q4 2024 showing a more favorable economic environment. Halligan attributes the slump to over‑hiring, excessive employee headcount, high downgrade rates, and low growth‑retention metrics across SaaS firms. He observes that the market is now stabilising as companies correct overextension. Halligan also highlights a broader platform shift that positions HubSpot well for future growth, and he underscores the durability of large SaaS incumbents such as Adobe, Salesforce, and Oracle, citing their multi‑hundred‑billion‑dollar valuations and ability to rebound from downturns. Throughout, he frames the conversation with a mix of seasoned optimism and realistic appraisal of the sector’s challenges and opportunities.

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It being said, SaaS was in a downturn. I don't know when it started, but I think it ended in Q3. If you look at the SaaS companies' numbers, see it through Sequoia, see it through all my HubSpot dashboards where I see our customers, it felt like we came out of the recession in Q3 of 2024. And I also just think it's like the universe like slammed SaaS down and then splashed it way up and then slammed it down again. Yeah. And it's ashing back up. I think we're in a different place in Q4 of this year than we were in Q4 of last year, economically, SaaS. People overbought, people had too many employees, and the downgrades were high. The growth retention for people were low, and I think we're just getting back into a better spot.
Hello, Saster. We are here with one of our all-time friends and favorites, Brian Halligan, co-founder, chairman of HubSpot. OG SaaS executive, thought through all the things we've thought through over the years, been to SaaS Annual several times. Now wearing 3 hats, right? 3 hats, chairman of HubSpot, Sequoia Growth, and Propeller VC fund, wearing 3 hats in, in mountain 2. Are you on mountain 1 or mountain 2? Salesforce is now worth $340 billion. Larry Ellison, I don't know, he may be worth $340 billion himself. I don't know. I have to look it up. This, you do it right and really laugh. You've been doing this since 2006, HubSpot, but in some ways it's just getting good, huh?
Yeah, we had a very ambitious vision and it's like a big giant painting and it's starting to get good, but it's still early. There's so much more work to do. and this is a platform shift afoot that we're very well positioned for. Yeah. These SaaS companies, they last. You look at Adobe and Salesforce, both worth, I don't know, I haven't looked recently, but 3, I call it 350 billion. Oracle, you gotta take your hat off to them. It was like, oh, they're going to die. They're going to slide. Rose from the dead. The last I checked, they were like 500 billion. So yeah, these SaaS companies, they last.
That was my— if you have an off-ramp and the offers hard to match, right? A billion dollars today with dilution, let's say it takes you another 7 years to IPO and you suffer and you're capital efficient, but you have 2 more rounds and then 6% dilution a year. That billion today is like 2.5 billion 7 years down the road probably, isn't it?