Over the past few years, SaaS stocks have been crushed.
Companies that once traded at 30x revenue fell 60–80%. Investors declared the “death of SaaS.” Growth-at-all-costs suddenly became a liability.
But here’s the reality:
SaaS isn’t dying. Bad pricing was.
Let’s unpack what actually happened.
The Zero-Interest Rate Bubble
Between 2015 and 2021:
- Capital was cheap
- Growth mattered more than profitability
- Investors priced in perfect execution
Companies like:
- Snowflake
- Shopify
- Zoom Video Communications
…were valued as if hypergrowth would last forever.
Multiples expanded beyond fundamentals. Revenue growth alone justified massive valuations.
That worked — until it didn’t.
What Actually Triggered the Crash
1. Rising Interest Rates
When rates rise:
- Future earnings are discounted more heavily
- Long-duration assets get hit hardest
- Growth multiples compress
SaaS companies often promise profits far in the future. Higher discount rates crushed those valuations.
2. Slowing Growth
Enterprise customers tightened budgets.
Digital acceleration normalized post-COVID.
“Nice-to-have” tools were cut.
Even durable companies like Salesforce saw growth decelerate.
Markets repriced the entire sector.
3. Profitability Became Mandatory
The new environment demands:
- Positive free cash flow
- Efficient customer acquisition
- Strong retention
- Operating leverage
Companies that adapted survived. Others are still struggling.
Is the SaaS Model Broken?
No.
Recurring revenue remains:
- Predictable
- Sticky
- High margin (at scale)
- Operationally efficient
What changed is investor tolerance for inefficiency.
The Bottom Line
The SaaS crash wasn’t the death of the model.
It was the death of:
- Growth without margin
- Overfunded point solutions
- Fantasy multiples
The next decade of SaaS will be smaller, leaner, and more profitable.
And that’s healthy