Navigating the SaaSpocalypse: Which Software Companies Will Survive the Coming Storm?

The software industry is in a state of flux. After years of rapid growth, many companies are facing a harsh reality: slowing sales, increased competition, and the looming threat of AI and advanced coding models. The term "SaaSpocalypse" has been coined to describe this perfect storm of challenges, striking fear into the hearts of investors and entrepreneurs alike. But what does the future really hold for the software industry, and which types of companies will be able to survive and thrive in this new landscape?

According to Jared Sleeper, a longtime software investor and expert in the field, the key to survival lies in understanding how the software business actually works. In a recent podcast interview, Sleeper broke down the economics of the industry and identified the types of companies that are best positioned to weather the coming storm.

At its core, the software business is a subscription-based model. Companies sell software as a service (SaaS), charging customers a recurring fee for access to their products. This model has been incredibly successful, with many companies achieving rapid growth and high valuations. However, as the market becomes increasingly saturated, growth is slowing and competition is heating up.

"Software companies are facing a lot of challenges right now," Sleeper explained. "Growth is slowing, and there's a lot of competition out there. But the biggest challenge is that the business model is changing. The old way of doing things is no longer working, and companies need to adapt if they want to survive."

So what types of companies will be able to adapt and thrive in this new landscape? According to Sleeper, the key is to focus on providing value to customers. "The companies that will survive are the ones that are able to provide real value to their customers," he said. "They need to be able to solve real problems and make their customers' lives easier."

Sleeper identified several types of companies that he believes are well-positioned to survive the SaaSpocalypse. These include:

• Vertical SaaS companies: These companies focus on providing software solutions to specific industries, such as healthcare or finance. By tailoring their products to the unique needs of these industries, they are able to provide real value to their customers and differentiate themselves from more generalist competitors.
• Companies with strong network effects: These companies have built large user bases and are able to leverage these networks to drive growth and engagement. Examples include social media platforms and online marketplaces.
• Companies with strong data advantages: These companies have access to unique data sets or are able to collect and analyze data in a way that provides a competitive advantage. Examples include companies that provide data analytics or business intelligence software.

On the other hand, Sleeper believes that companies that are focused on providing commoditized software solutions will struggle to survive. "If you're just providing a generic software solution that can be easily replicated by someone else, you're going to struggle," he said. "You need to be able to differentiate yourself and provide real value to your customers."

The rise of AI and advanced coding models is also likely to have a major impact on the software industry. According to Sleeper, these technologies will enable companies to automate many tasks and processes, making it easier for them to provide value to their customers. However, they will also increase competition and make it harder for companies to differentiate themselves.

"AI is going to change the game for software companies," Sleeper said. "It's going to enable them to automate many tasks and processes, but it's also going to increase competition. Companies need to be able to adapt and find ways to provide value to their customers in a world where many tasks are automated."

In conclusion, the SaaSpocalypse is a real and present threat to the software industry. However, by understanding how the business works and identifying the types of companies that are best positioned to survive, investors and entrepreneurs can navigate this challenging landscape and find opportunities for growth and success. As Sleeper noted, "The companies that will survive are the ones that are able to provide real value to their customers. They need to be able to solve real problems and make their customers' lives easier."