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Jason Lemkin: WTF is Going On in VC? Are LPs Investing in New Funds? | 20VC #965

The question is: “are VCs still investing?”. Today we are joined by Jason Lemkin; one of the OGs of SaaS of the last decade. As the Founder of SaaStr, he has inspired more SaaS founders than one can imagine building “The World’s Largest Community for Business Software.” Jason also invests out of the $100M SaaStr Fund and in the past Jason has led rounds into TalkDesk, Pipedrive, Algolia, Gorgias, Salesloft, and many more incredible companies. Prior to founding SaaStr, Jason was the Co-Founder of Echosign, an early e-signature business, funded by Emergence Capital and that was acquired by Adobe for $100M. -------------------------------------------------------------------- Timestamps: 0:00 Intro 0:36 Where are the companies? 2:07 What has changed with early-stage investing? 3:46 Where should early stage founders focus their efforts? 7:40 SaaS Buying Patterns 11:30 How are marketing spends being impacted? 13:21 Marketing Advice for Startups 16:55 How To Do Target Setting 18:20 Biggest Mistakes Founders Are Making 24:34 Investing in Public Markets 27:41 Company Mark Downs 30:07 Will employees stay or leave? 32:57 Do you meet the full team before investing? 35:24 The Power of the Mature Founder 38:50 What happens to LP markets? 43:13 Do you know your winners early? 45:26 Are LPs re-uping? 55:59 What have you changed your mind about in the last 24 months? ------------------------------------------------------------------------------------- In Today’s Episode on “Are VCs’ Still Investing” We Discuss: 1. What Does it Take To Get Funded Today: Early-Stage: How has what VCs want in early-stage investments changed in this new environment? Should startups prioritize growth? Profitability? Capital efficiency? How long a runway is sufficient enough for founders to feel comfortable? Why does Jason believe most founders are still deluded that they are fundable? Growth Stage Companies: Is the growth stage totally dead? What will we see happen to all the companies that raised $50M+ at large valuations that have very little revenue? Why does Jason believe that any operator who joined a $BN company in the past few years will not make any money on their equity? What should they do now? Will we start to see down rounds and structured rounds at the growth stage? If so, when? Public Markets: Why does Jason believe this is a time unlike any he has seen before? Are we in full recession now in Jason’s mind? In Dec 2023, will this be better or worse? Which are the most under-priced assets in the public markets today? Why does Jason believe VCs investing in public markets are losers? 2. Micro Funds Will Be Decimated and LP Behaviour in 2023 Why does Jason believe that micro-funds in 2023 will be decimated and unable to raise new funds? How will the majority of LPs approach new fund investments? How will LPs approach re-investing in their existing managers? How has what they need to see changed? 3. Marketing and Sales: We Need To Change Budgets and Targets How should CEOS be changing their marketing budgets in 2023? What are the single biggest mistakes CEOs are making in this downturn with regard to their marketing budget? How do sales targets need to be amended in the face of changing buying patterns? How do the best sales and marketing leaders respond to these changing budgets and targets? How do the worst respond? ------------------------------------------------------ Subscribe to the Podcast: https://www.thetwentyminutevc.com/are-vcs-still-investing/ Follow Harry Stebbings on Twitter: https://twitter.com/HarryStebbings Follow Jason Lemkin on Twitter: https://twitter.com/jasonlk Follow 20VC on Instagram: https://www.instagram.com/20vc_reels Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok ----------------------------- #JasonLemkin #SaaStr #venturecapital

Jason LemkinguestHarry Stebbingshost
Jan 12, 202357mWatch on YouTube ↗

At a glance

WHAT IT’S REALLY ABOUT

Jason Lemkin Explains the Brutal New Reality of Venture Capital

  1. Jason Lemkin and Harry Stebbings dissect the post‑2021 venture and SaaS landscape, contrasting the exuberant, inflated years with today’s far stricter funding and operating environment.
  2. Lemkin argues that while great companies and growth still exist, the bar for being fundable has dramatically risen: capital efficiency, realistic paths to $100–200M ARR, and true competitive advantage now matter again.
  3. They explore shifting LP appetite, the slow‑motion reset of growth and marketing spend, the overhang of overvalued unicorns, and why founders must assume capital is scarce and build accordingly.
  4. Lemkin predicts conditions will improve modestly by year‑end, but insists the extreme valuations and easy money of 2021 are gone for good, and founders must embrace that startups are supposed to be hard.

IDEAS WORTH REMEMBERING

5 ideas

Being fundable now requires both top‑tier growth and capital efficiency.

Investors want companies that can plausibly reach $100–200M ARR within a decade while keeping total capital raised closer to ~$100M, not the $300–400M that briefly became normal; burn without efficiency is no longer tolerated.

Competition and true differentiation matter again—founders must explain why they’ll win.

The “Postmates effect” era, where several #3–#5 players could still produce billion‑dollar exits, has ended; founders need a clear, credible story about segment focus or product edge and why competitors stumbled.

Cutting marketing and sales too deeply will starve future pipeline.

Companies are over‑reacting by slashing long‑term marketing and sales capacity to protect runway, but Lemkin argues this will leave them under‑staffed and under‑pipelined when demand and multiples improve.

Founders must build conservative, sensitivity‑driven financial models.

Teams often underestimate how a small miss on growth, with fully loaded headcount, can spike burn; leaders should model downside scenarios, accept their trailing 3–4 months as the baseline reality, and plan from there.

Assume you are unfundable unless you have concrete evidence otherwise.

Lemkin urges founders to operate as if follow‑on capital won’t be available—raise as much as you can when you can, and only relax that stance if trusted investors explicitly commit to future term sheets at specific milestones.

WORDS WORTH SAVING

5 quotes

For founders, you have to understand that will never lead to a return of 2021. Never.

— Jason Lemkin

The competition slide finally matters again. Why will you win?

— Jason Lemkin

If you didn’t have multiple billion‑dollar cash exits in 2021, you’re not a good investor.

— Jason Lemkin

If you join a company with a valuation over a billion in 2023, you’re going to make nothing.

— Jason Lemkin

When I see a founder cry, I have no sympathy… it’s supposed to be hard.

— Jason Lemkin

Post‑2021 reset in venture capital and SaaS valuationsChanging early‑stage investment criteria and the end of the “Postmates effect”Go‑to‑market in a downturn: sales, marketing, and pipeline buildingCapital efficiency, burn management, and realistic financial modelingEmployee equity, unicorn overvaluation, and career incentivesLP behavior, fundraising for GPs, and the fate of emerging managersFounder maturity, emotional resilience, and the reality that startups are hard

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