On the one hand, SaaS is not immune to the global downturn.
Valuations are falling
Restricted access to capital Consumers (and businesses) have less purchasing power. The bad news for SaaS On the one hand, SaaS is not immune to the global downturn. In March, Social Capital CEO Chamath Palihapitiya explained that investors would pay 8 x ARR for a SaaS company when interest rates are zero, but for every 1% increase, the valuation decreases between 15 and 20%. With interest rates heading north, valuations for private and public SaaS are tumbling (the average market capitalization is down 57% YoY).
Restricted access to capital
With non-existent rates and easy access to capital, many SaaS companies focused on all out growth over the past few years. Now that capital is more expensive, investors are holding back and SaaS scale-ups are having to reign in their spending to avoid downrounds.
Consumers (and businesses) have less purchasing power
With the increasing cost of living, consumers are monitoring their expenditure and reducing ‘niceto-have’ subscriptions. B2C SaaS will feel the heat first (greater churn and less sales), which will filter through to B2B SaaS as businesses increasingly have less revenue.