A short video conversation between Harry Stebbings, Jason M. Lemkin, and another speaker about the current reality for public SaaS companies: many face low growth (examples cite ~4% and an average of ~16%), which makes them vulnerable to acquisition offers (e.g., Semrush/Adobe, Eventbrite, PagerDuty). Panelists argue boards may feel compelled to accept premiums if management can't promise greater future value, and private equity or strategic buyers may combine assets (including small AI startups) to restore growth.
I do just want to take the flip side of that, which is a less positive or optimistic side. Page of Judy 2x a billion valuation at 500 million ARR 4% growth. But how do we think about this? Bluntly, very harsh new reality given the lack of growth in the subsequent pricing from it.
When you're public and your stock is floating around nowhere at a low valuation, you're just very vulnerable to this. They offer you a 50% premium and you get called in by the board, gets called in, the lawyer gives you the speech about fiduciary duties. And if you can't come up with a convincing reason why you can build better value than that premium, you're very forced to take it. It's not 100%, but it's a tough place to be, right? Someone else, very smart money thinks these things are worth buying. And I think they're looking at it and saying, you Mr. Seller, haven't created value here, haven't found growth. And I think we can. And if you look at the three companies we're talking about, because let's lump in Semrush because they were acquired two weeks ago by Adobe and Jason and I disagreed, but we definitely felt someone like Adobe could do something with that asset. I'm not sure what the direction Eventbrite could take, but I think, and you said it in your notes, Harry Pagerduty has an obvious set of next products, including AI agentic products around around downtime resolution that feel obvious to me. And frankly, I wouldn't be surprised if an aggressive PE firm said, oh my gosh, I can buy this thing. I can then buy some small little hot AI startup, put them together and get this thing back to 20% growth, value that 10 times and look like a hero. So the positive would be other people's smart, savvy money. Look at these assets and say two times revenue is stupidly cheap. I'll have that.
I hope so.
I think that the direction of travel should have been clear. And if you'd kind of been able to add it, I think, you know, we talk a lot about how distribution is a huge advantage in software. I mean, literally every ops team on the planet uses pager duty. And you know, for God's sake, it's pretty obvious what to add here, people. Get it done.
It's just a very sobering reality.
Now it feels like now that the average public SaaS company is growing like 16%, it feels like no one figured this out. Like we've never grown more slowly, right? No one's ever grown this slowly. But I'm worried that the majority of the public SaaS companies didn't figure this out. The majority of the public SaaS companies, I think, are in a TAM trap. A TAM trap?
It's a good title for the public.
How do we not all figure out the TAM trap? What hope is there for the rest of us?
