The Rising Stakes In SaaS

In his article “The Rising Stakes In SaaS” Tomasz Tunguz somewhat confirms my sentiment about the end of the startup era:

Machine learning, broad consolidation, category creation, and new distribution models each will change the SaaS ecosystem in fundamental ways. As the number of new startups ebbs, and major forces in the industry reshape it, I suspect we’re going to see a massive amount of innovation in SaaS, a reinvention after the perfection of a 20 year old playbook.

I found the rest of his article interesting as well.  In particular this part on how companies tend to react to the massive levels of competition:

This rivalry causes four major responses:

  1. Verticalization – compete with a horizontal player by picking one customer segment and building a product better suited to them. Trades market size for better product market fit.
  2. Segmentation – focus on SMB, Mid-Market, or Enterprise, to play where competition isn’t present.
  3. Feature optimization – develop a product with 20% of the features but 80% of the value, and use a simplified product to challenge the competition.
  4. Opting out of starting a company – deciding the timing isn’t right because of the competition.