The growing dissonance between two business models (SaaS and VC)
Christoph Janz

Be aware of the selection bias: many ‘fast growing SaaS’ companies are in markets that don’t end up producing large companies. Concretely, there are many SME SaaS companies that are nice and fast growing initially, but how many companies IPO that target SME? If you look at the IPOs, many are targeting enterprises, and ‘building for SME and then adding Enterprise Plans’ is often not the right strategy (though it happens of course).

On the flipside, if you build for enterprise from Day 1 (like many IPO candidates did), means that their growth from 0–100k MRR, and then to 10m ARR, could be much slower as compared to SME SaaS. This leaves the following dilemma:

if you want to be metric driven (e.g. revenue), and you’re an early stage investor, then you might never invest in the IPO candidates that target enterprise from Day 1. To invest in enterprise at the early stage, it requires first principles thinking (is there a fundamental need, is this going to happen, will the team be able to compete against the big guys — the question of budget is usually not a problem, since enterprises have money)

What do you think about this claimed dilemma?

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