SaaS Saturation, Squeeze Strategist, and Systematic Thinking ??
TL;DR
BUSINESS
?? Should we be sick of SaaS already?
There are approximately 30,000 SaaS companies worldwide. The global SaaS industry is worth more than $200B. SaaS companies got 47% of all VC capital in 2023, a humble $73B (almost double less than $130 in 2021).
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In 2023, the average number of SaaS apps a business uses reached 371 (?!). That's 253 for SMBs, while mid-market companies use 335 on average and enterprise firms average 473. ??
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The SaaS industry has seen unprecedented growth in recent decades. There is a SaaS for everything - from listing company inventory to making travel warrants. And no wonder - it’s a trendy thing to do. After all, half of that VC money is spent on marketing and sales.
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As great as the outcomes were for the industry, they are not so great for the Customer.
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To connect all these disparate tools, companies throw in humans, spreadsheets, and more software like IPaaS, RPA, DWH, and various other SaaS for managing SaaS. There are a lot of orphan SaaS and duplicate SaaS in bigger organizations. Every department has a credit card, so you often end up with 3 marketing automation tools.?
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The market tide is down, and there are a lot of naked butts. How will SaaS change in the post-zero-interest era?
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The SaaS spending is still estimated to grow by 13% this year.? The customers are still buying. From what we see on the market, they are not buying vitamins, but painkillers. The focus is on SaaS which can increase revenue, rather than on SaaS which can improve efficiency. The efficiency budgets are mostly penciled in for “AI-something”, and are just waiting for SaaS that does something useful with AI to scoop it up (there is little competition here).?
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Low-code platforms and app-builders owned by cross-functional internal “citizen-developer” teams could finally live up to their promise.
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Hopefully, IT will step up and help business users steer the SaaS forest.
In front of us are a few years of SaaS elimination and consolidation.?
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Let’s see how we'll handle the hangover. ??
HERO OF THE DAY
???? The diamond hands of Roaring Kitty?
Keith Gill (AKA Roaring Kitty AKA DeepFuckingValue) was a financial analyst. He saw that GameStop stock was undervalued and?that several?hedge funds were shorting it. Institutional investors believed it was worthless.
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Gill believed the opposite. He liked the stock, as he put it.
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He started analyzing it live on his YouTube channel. He also posted about it in the r/wallstreetbets subreddit. The pandemic was still raging, and people had time on their hands. They gathered around. He convinced them to buy and hold the stock. They would hold it until they closed the hedge fund’s short position.
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Roaring Kitty put his money where his mouth?was,?and invested his entire savings of $53,000?into GameStop.
His following on Reddit did the same. Their numbers grew.
At one point,?there were?more than 8 million people involved.?They were buying and holding the stock, trying to stick it to the Wall Street man.
The stock whooshed from?under $10 to almost $500.
This became the biggest short squeeze?of the 21st century. It was the first by retail investors. Or dumb money, as Wall Street likes to call them.
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Ironically, dumb money destroyed a hedge fund that was shorting GameStop. It was Melvin Capital.
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Roaring?Kitty’s?effort paid off. He helped the little man take the power back. And earn some money along the way. But it?wasn’t?about the money. It was about sending a message to the institutions that failed them. In that spirit, many GameStop investors?made donations to their local communities.
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The man even testified in front of Congress,?in a Zoom hearing. They wanted to know what the fuss was all about. With a straight face, he looked at the?camera,?and told the congressmen:
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He was never charged because he never did anything illegal. Au contraire.
A modern version of Robin Hood, he gave people a glimpse of hope and started a revolution.
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When it was over, he vanished from the?public,?with a clear name, pocketing about $30 million for his family.
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PS:?There’s?a great movie about all this, appropriately called?Dumb Money.?
BOOK OF THE DAY
?? Thinking, Fast And Slow by Daniel Kahneman
Daniel Kahneman was truly a great man. He should, and will be missed.
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The father of behavioral economics, prolific researcher, and a Nobel Prize winner, his influence on economics, business, and even pop culture was immense.
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His research on decision-making completely changed my perception of economics and science in general, as a Psychology major.
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Thinking, Fast And Slow is his best book. A bridge between economics and psychology, it contains the essence of all his research with many practical takeaways for everyday life.
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For example, Kahneman proved that people don’t act rationally in all situations, as economists thought until then. He called it the prospect theory. It proved that people hate losing more than they like winning.
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He also wrote about biases people have, such as anchoring, when people rely heavily on the first piece of information they get - the anchor. You know, when you buy a discounted t-shirt priced at $100 for $70. Your sense of a great deal comes from the anchor - the price originally set at $100.
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Another one of the crucial findings of the book is Kahneman’s theory of two systems of thinking.
System 1 is fast and automatic, using instincts and gut reactions.
System 2 is slower and more thoughtful, using logic and reasoning.
For example, if you catch a ball thrown at you, that’s System 1 reacting quickly. But if you’re solving a math problem, that’s System 2 taking its time to think things through.
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Seriously, the book is chock-full of practical and interesting findings, and if you’re interested in thinking better and making better decisions, you should read it.
See you in two weeks ??