The Rebirth of Software as a Service
Summary
Meanwhile, in a prolonged era of low interest rates and abundant investor capital, the land-and-expand economics inherent in this approach allowed many SaaS firms to grow without regard to near-term profitability. A well-known example is Peloton: in 2020 at the height of the pandemic and growth for its subscription fitness service (and $50 billion valuation), founder and then-CEO John Foley emphasized the “massive opportunity [and] when you say ‘normalize coming out of Covid,’ we don’t see that.” Less than two years later, Foley was replaced as CEO, valuation was less than 1/10th of what it was in 2020, layoffs were a serial occurrence, and the firm needed a $750 million loan in 2022 “to strengthen the balance sheet.” But it wasn’t just Peloton: witness similar declines, layoffs, and revised growth forecasts at Shopify, DocuSign, Salesforce, and others reliant on a subscription model during the pandemic. One reason why is that the traditional source for leads in this business model — paid search and other online marketing vehicles — is increasingly cluttered, expensive, and an example of diminishing returns. Automation tools enabled firms to send thousands of templated emails: “Hello , as the at you must experience .” Not only did this generate many false positives, but the customer problem and solution are dynamic variables, not static. But those roles are much more nuanced in a subscription model, require cross-functional links with non-sales groups, and sales leaders must rethink their hiring criteria and KPIs to deal with this reality.