The Twenty Minute VCJason Lemkin: PluralSight S*** the Bed & The Next IPO Candidates | E1160
CHAPTERS
- 0:00 – 1:02
Launching “This Week in SaaS” and the week’s big shocks
Harry and Jason kick off a new in-person format and set the premise: break down the biggest SaaS stories of the week. They tee up a particularly rough news cycle as the lens for discussing broader SaaS market dynamics.
- •New recurring segment idea: weekly SaaS news unpacked
- •Setting a candid tone: “one hell of a week”
- •Preview of themes: market pullbacks, PE, IPO drought
- 1:02 – 4:57
Pluralsight written down to zero: how a $3.5B PE buyout breaks
Jason explains what likely happened operationally and financially behind Vista’s Pluralsight mark-down to zero. The core issue: debt servicing becomes untenable even with decent operating margins, raising questions about PE leverage assumptions.
- •PE playbook: heavy debt financing can fail when refinancing costs spike
- •Back-of-the-envelope: ARR, margins, free cash flow vs debt service mismatch
- •Speculation about asset/IP moves and deal structure oddities
- •Why a total write-off is devastating even for large funds
- 4:57 – 6:20
Is PE still the “savior” for SaaS exits after Pluralsight?
They debate whether private equity can remain the major buyer for SaaS companies that can’t or won’t IPO. Jason argues PE can’t tolerate many blow-ups, especially given the scale of recent mega-buyouts like Zendesk and Anaplan.
- •PE needs low loss rates; repeated write-offs become fund-threatening
- •Mega deals at risk: Zendesk/Anaplan as examples of leverage sensitivity
- •PE historically relied on durable NRR and predictable cash flows
- •Concern: if debt can’t be serviced broadly, exit markets worsen for founders
- 6:20 – 7:43
B2B2C vs B2B2B: why selling into tech is uniquely brutal right now
Jason lays out a framework: software selling into tech (“B2B2B”) is under sustained pressure, while “B2B2C” and real-economy segments are healthier. The discussion challenges simplistic explanations like PLG being the primary driver.
- •B2B2C example: Canva; healthier demand from consumers/SMBs
- •B2B2B = selling software to tech; continued belt-tightening in tech spend
- •PLG reframed as “freemium with better analytics,” not a new phenomenon
- •Macro contrast: low unemployment vs persistent tech-specific cuts
- 7:43 – 11:13
AI spending is substitution, not net-new: the budget reality founders face
They explore how GenAI is reshaping software budgets by displacing existing tools rather than expanding total spend. Jason shares anecdotes of buyers churning many apps to fund a single AI purchase and explains why founders must map budget sources explicitly.
- •Gartner framing: SaaS growth may be boosted by AI, but via substitution
- •Anecdote: ‘kill 12 apps, buy 1 AI app’ budget reallocation
- •Founders must know the budget line item and whether purchases are pre-budgeted
- •Discovery best practice: directly asking ‘Is this budgeted?’ early in sales cycles
- 11:13 – 14:23
“Play the game on the field”: investing conservatism vs AI-era pressure
Harry challenges Jason on whether being cautious (especially in AI) risks missing the market. Jason reflects on his historically conservative approach, the downsides of over-indexing on not losing LP money, and how venture incentives can push risk-taking.
- •Jason’s confession: extreme caution may be ‘wrong’ strategically in venture
- •Tradeoff: diligence reduces stress but can reduce upside exposure
- •LP capital psychology: when to take it ‘too seriously’ vs embrace variance
- •Critique of SPVs/side vehicles and how they can distort risk behavior
- 14:23 – 20:10
Salesforce’s $50B drop: guidance shock and the collapse of the NRR “engine”
They dissect why Salesforce fell so sharply: not the earnings miss, but the signal that single-digit growth may persist. Jason argues this undermines a core SaaS assumption—high net revenue retention should sustain growth—raising alarms for the whole sector.
- •Market reaction driven by forward guidance, not quarterly miss magnitude
- •Single-digit growth reframes Salesforce as less of a ‘growth stock’
- •NRR reliance: the classic 115–120% retention model is faltering
- •Drivers: seat reductions, smaller deal sizes, heightened pipeline coverage needs
- 20:10 – 22:50
Why some SaaS segments still thrive: vertical SaaS, security, and real-economy buyers
Jason pushes back on “all SaaS is broken,” highlighting companies still growing 30–40%+ at scale. The key differentiator: selling outside tech, into verticals, consumers, or security-critical budgets.
- •Examples: Canva, Samsara, Zscaler, Toast, Monday, Klaviyo strong growth
- •Non-tech customers outperform tech customers in spend resilience
- •Security remains structurally strong despite macro noise
- •Actionable lens: identify ‘where the gems are’ rather than hibernate
- 22:50 – 26:03
AI as product table stakes—but not yet a revenue accelerator for incumbents
They debate whether AI features will let saturated incumbents reprice and re-accelerate growth. Jason’s view: AI will improve products dramatically, but evidence of meaningful revenue lift is scarce, and adoption may take 24–36 months to clarify.
- •Incumbents can ship great AI features; monetization remains uncertain
- •Long contracts and high retention make near-term AI impact hard to measure
- •AI adoption timeline: 24–36 months to see clear revenue effects
- •Non-negotiable takeaway: you must build AI parity or risk being steamrolled
- 26:03 – 28:53
Multiples compression and IPO drought: why venture math stops working at 6x
They move from company-level commentary to market structure: few SaaS IPOs since 2021 and muted public multiples even for fast growers. Jason argues the ecosystem needs multiple reflation to make late-stage venture returns feasible.
- •Only a couple SaaS-ish IPOs since 2021 (e.g., Klaviyo, Rubrik)
- •Even high-growth IPOs trading around ~6x is a warning sign
- •Claim: venture needs ~30–40% multiple reflation for rounds >$100M to pay off
- •UiPath commentary: short-term volatility vs longer-term fundamentals
- 28:53 – 33:12
HubSpot–Google acquisition rumor and antitrust: M&A uncertainty as a ‘cloud’
They assess the plausibility of Google acquiring HubSpot and the practical constraint of regulators. Jason contrasts Figma/Adobe with Canva’s competitive threat and explains why antitrust risk can chill M&A across SaaS broadly.
- •Acquisition rumors can be real—or just ‘on someone’s slide’
- •Jason’s ‘tell’: leadership goes quiet during real processes
- •Antitrust lens: Google as marketing platform + HubSpot’s marketing roots = risk
- •Regulatory uncertainty reduces M&A as a liquidity outlet for founders/VCs
- 33:12 – 35:43
Liquidity crisis explained: IPOs without tradable float, DPI vs TVPI, and valuation games
They unpack why “going public” may not solve liquidity if investors can’t distribute shares and if market caps are too small to enable meaningful M&A. The conversation expands into LP measurement incentives (TVPI vs DPI) and how markups can encourage distorted behavior.
- •IPO at ~$200M ARR may be possible, but liquidity can still be limited
- •Small public market caps constrain strategic M&A capacity
- •Jason’s blunt take: venture funds are often unsuitable for individuals due to lockups
- •TVPI remains influential because many LP staff are evaluated on paper marks
- 35:43 – 57:40
MongoDB, Twilio, and the fate of former high-flyers
They revisit the “growth stock to non-growth stock” transition using MongoDB’s deceleration and Twilio’s CEO change as case studies. Jason argues guidance resets are the real shock, while business model constraints (margins, acquisitions like Segment) weigh on narratives.
- •MongoDB: ‘teens growth’ guidance reclassifies it in public markets
- •Signal: conditions aren’t easing—HubSpot, Salesforce, Mongo all warn it’s still hard
- •Twilio issues: structurally lower margins and under-monetized acquisitions (Segment)
- •Broader implication: leadership and strategy resets may be required post-2021
- 57:40 – 1:03:19
Founder fundraising mistake: asking for too much money and silently losing investors
Jason explains how oversized round asks can disqualify founders before a meeting ever happens—especially when fund sizes and check-writing limits don’t match. He critiques leftover 2021-era fundraising tactics and gives practical guidance on framing and sizing rounds.
- •Outdated tactics: artificial urgency and ‘moving fast’ posturing
- •Round size must map to investor check size and fund construction constraints
- •Large asks force syndication and higher ‘must-win’ conviction thresholds
- •Better framing: explain why the early signal is real and what the capital accomplishes
- 1:03:19 – 1:15:51
SaaStr economics and the brutal realities of running large events
Harry presses Jason on SaaStr’s revenue, why it’s down, and whether events still make sense. Jason shares operational scars—COVID losses, venue mishaps, and talent challenges—while explaining why he continues: impact, differentiation, and the ‘jigsaw puzzle’ of building.
- •SaaStr revenue scale and sponsor churn tied to unicorn slowdowns
- •Events marketing spend still exists, but attendee behavior has changed post-COVID
- •Operational risk: $10M COVID shutdown, vendor failures, venue booking disasters
- •Why keep going: impact, rarity of capability, and staying engaged as a builder
- 1:15:51 – 1:18:01
Quickfire: best founder meeting, ideal board member, and signs of quiet quitting
They close with rapid questions on investing instincts and founder behavior. Jason highlights ‘seeing the future through the founder,’ picks Shopify’s Tobi as a demanding board member, and calls out covering for mediocre execs as a key warning sign.
- •Best meetings: when the founder makes the future obvious
- •Board composition: preference for demanding, no-nonsense operators
- •Quiet quitting signal: rationalizing underperformance of key VPs
- •High standards for management team quality as the growth lever
- 1:18:01 – 1:20:50
Final bet: will SaaS public multiples return to an ‘8x world’ by end of 2025?
They end by formalizing a market-wide wager: Jason takes the over on SaaS multiples rebounding to ~8x by 12/31/2025, Harry takes the under. It’s a capstone on the episode’s central tension—whether the market normalizes fast enough to restore venture math.
- •Multiples as the core health metric for SaaS and venture outcomes
- •Current baseline cited around ~6x; target ‘needs’ ~8x
- •Jason moderates confidence after a missed IPO timing bet
- •Wrap-up and sign-off with in-person banter
