Jason Lemkin on SaaS Valuations, Private Equity and the Liquidity Problem

Salesforce lost roughly $50 billion in market capitalization in a week when software valuations came under pressure. Jason Lemkin tells Harry Stebbings that investors were reacting less to a quarterly miss than to expectations that growth would fall into single digits.

They begin with Pluralsight, whose $3.5 billion Vista buyout Stebbings says was marked down to zero. Lemkin points to the reported $1.5 billion of debt and speculates that debt service became unsustainable; his rough revenue and cash-flow calculations and mention of a separate intellectual-property entity are not verified explanations of the transaction.

Lemkin has had portfolio exits to Vista and other private-equity buyers, and sees that market as an important source of liquidity for founders and investors. He worries a large loss could make that exit route less dependable, although he does not know how other transactions will perform.

He distinguishes software sold to technology companies from products reaching consumers and the broader economy. He says technology customers are still cutting spending, while he cites Canva as an example of stronger growth among consumers and small businesses.

Stebbings suggests product-led growth may explain Canva’s trajectory. Lemkin argues that free trials and freemium distribution are not new, even if analytics and execution have improved. In his view, differences in customer budgets explain more than a new label for distribution.

Could Pluralsight change private-equity appetite? Lemkin hopes buyers remain active but says leveraged deals cannot routinely absorb multibillion-dollar losses. His examples of potential difficulty servicing other buyout debt are hypothetical, not claims that those companies are facing the same outcome.

Asked whether limited partners will shift allocations, he reports a small sample of about three conversations: investors still seemed optimistic about alternatives and tolerant of a weak fund or two, while expressing concern about expensive AI deals. He cautions that his sample is small.

Lemkin says an investor entering an AI company at a multibillion-dollar valuation must believe a much larger outcome is possible after dilution. Rapid AI spending and OpenAI’s reported revenue growth provide a bull case, but he acknowledges that the eventual number of enormous winners is unknown.

He believes much AI spending substitutes for existing software budgets. He recounts hearing that a portfolio company’s customer planned to cut twelve applications while buying one AI product; that anecdote does not establish how all AI spending is funded.

Founders should understand the budget their product competes for, Lemkin says. He recommends asking enterprise prospects early whether a purchase has been budgeted; an experienced buyer can then explain whether the deal is part of an approved project or requires discretionary money.

Stebbings asks whether Lemkin worries that slow investing and limited AI exposure mean he is missing the market. Lemkin says his caution may have been excessive: he has treated limited partners’ capital very seriously and says this was the first year he expected to write off investments, although he believed his funds would still perform.

His first $800,000 check, into Pipedrive, received exhaustive diligence and later did well, he says. He reflects that worrying too much about losses can restrain risk-taking, while noting that a fund can survive an individual loss. His comments describe his own trade-off, not a guarantee of returns.

Lemkin also criticizes the behavior he sees around special-purpose vehicles and opportunity funds, where managers may take large risks with little concern about individual losses. He says he has two opportunity funds but that such indifference is not his own approach.

On Salesforce, he says the significant news was a weaker growth outlook, not simply the size of the quarterly miss. He interprets management’s projections as a signal that customer spending had not recovered and that the company could remain in single-digit growth.

Enterprise software investors have relied on net revenue retention above 100%, with existing customers expanding enough to drive growth. Lemkin cites a company he holds, Fastly, as an example of growth from existing customers despite no net new customers, according to his account. He says that seat reductions and smaller deals now challenge that assumption.

He connects that retention pressure to the private-equity model: a buyer cannot rely indefinitely on expansion from existing customers if spending contracts. Stebbings raises competition from HubSpot; Lemkin agrees it matters but says HubSpot’s own net retention has also declined.

The two consider mature companies such as Dropbox and Box that have settled into slower growth. Lemkin respects Box founder Aaron Levie but says even reaching a second billion in revenue can take many years at a low growth rate; his arithmetic is illustrative, not a company forecast.

He resists treating the entire software market as weak. He cites strong growth at companies serving consumers, restaurants, physical industries and security, while saying software sold to technology companies faces sharper budget cuts. His company growth figures are contemporaneous estimates.

Salesforce, he says, faces tighter budgets and needs more pipeline to close the same amount of business. By contrast, he sees a separate risk for companies that wait too long to introduce additional products: a single product can eventually saturate its market.

Stebbings asks whether AI could help incumbents charge more. Lemkin expects AI to improve products such as Box by making unstructured documents easier to use, but says the interview-era evidence had not yet shown a clear revenue boost. Better functionality and monetization are separate questions.

Lemkin thinks it may take another two or three years to understand the economics, yet argues that AI functionality is becoming necessary to compete. His view is a prediction; he also maintains that spending is often reallocated rather than newly created.

Stebbings points to compressed public-market multiples. Lemkin is less concerned about low multiples for slow growers than about strong recent IPOs trading at modest multiples. He estimates venture economics need a roughly 30–40% rebound in multiples to support returns on higher-valued rounds; that is his investment judgment, not a demonstrated threshold.

They discuss UiPath’s founder returning as CEO after a short interval. Lemkin says leadership change can unsettle markets but believes a committed founder’s return could eventually help. He distinguishes this view from his assessment that some other stock declines reflected weaker forecasts.

Stebbings asks about a rumored Google acquisition of HubSpot. Lemkin initially treats the report skeptically: potential targets routinely appear on acquisition lists. He speculates about the possibility but explicitly says he has no inside knowledge and cannot establish whether a deal is underway.

On regulatory risk, he says the outcome could depend on whether authorities view HubSpot primarily as a marketing competitor or as a broader customer-management platform. He disagrees with the treatment of Adobe’s proposed Figma acquisition and considers Canva a more direct Creative Cloud competitor; these are his opinions, not legal findings.

The broader problem, Stebbings says, is liquidity: private equity may be less reliable, acquisitions can face regulatory hurdles, and IPOs have been scarce. Lemkin notes that a company might list at around $200 million in annual recurring revenue yet still provide little immediate liquidity to investors if shares cannot be sold.

A small public valuation can also limit acquisition currency, though employees may gain liquidity. Lemkin says illiquidity is part of venture investing and questions whether individuals should lock up capital for many years; he distinguishes their needs from those of long-horizon institutions.

Discussing MongoDB’s share-price decline, Lemkin sees another example of a highly regarded company facing a sharp growth slowdown and carefully controlled customer spending. He contrasts hopes of a broad recovery with company-specific comments that conditions remained difficult.

On Twilio, he praises the platform and its founder Jeff Lawson but acknowledges he does not know the outcome. He points to relatively low margins and the challenge of making its acquired Segment business profitable as pressures in a market demanding efficiency.

For private companies under pressure after high valuations, Lemkin thinks rebuilding management teams can become necessary as leaders tire of prolonged change. He makes this as a general observation and says he cannot speak specifically for Gong.

Asked about buying Notion at $10 billion, he frames the decision around the eventual company value needed to make the investment worthwhile. Comparisons with HubSpot and Atlassian are his rough thought experiment; he does not claim to know Notion’s revenue or future valuation.

Lemkin says he generally does not seek to sell a seed position before a company reaches a billion-dollar valuation: a strong individual multiple can still return too little to move a fund. He illustrates how dilution and a partial sale reduce the cash returned, while acknowledging that an individual investing personal money might rationally sell sooner.

Stebbings describes an unnamed portfolio company valued at $3 billion: his fund’s 2% stake would be worth $60 million on paper, twice the size of its $30 million fund, but he says he cannot obtain liquidity. The example distinguishes a paper valuation from cash returned.

The hosts debate TVPI, which includes paper valuations, and DPI, which measures distributions. Lemkin says some limited-partner employees are evaluated on markups, making them influential even before cash is returned. He thinks a metric is necessary but argues that markups can distort incentives.

He says he aggressively marked down holdings at year-end and later had a small liquidity event at three times his revised mark. He suspects some funds preserve high valuations through structured rounds and extensions, but presents that as his impression rather than a finding about every fund.

Lemkin cites an analysis suggesting roughly 57 trackable US software exits above $50 million annually over a decade, while noting that some transactions are not tracked. He worries that if startup formation has grown much faster than that exit count, acquisitions have become harder to secure; this inference depends on the underlying dataset.

A small brand in a niche can generate inbound referrals once a company reaches a few million dollars in revenue, he says. He recalls reaching profitability at $5 million in revenue with very low-cost marketing, though he notes that companies often add paid sales and marketing as they scale, so overall acquisition cost may not fall.

Looking for potential IPO candidates, Lemkin names Canva, Figma, Stripe and Plaid as companies he expects could become strong public businesses. His discussion of timing and value is speculative; he estimates possible Canva outcomes using different revenue multiples and notes a reported lower secondary valuation after a higher funding round.

Stebbings wagers that Stripe will remain private for four years. Lemkin says companies able to provide employee and investor liquidity through secondary transactions may prefer to stay private and keep investing in product. He worries public-market pressure for efficiency leaves less room for research and development.

Lemkin returns to examples of growth beyond the technology sector, citing Canva, Toast, Samsara, Monday, Zscaler and Klaviyo. The figures he gives vary across the discussion and should be read as approximate, contemporaneous examples rather than audited comparisons.

He says he would favor companies with committed founders such as ZoomInfo’s Henry Schuck, while acknowledging competition and negative factors. He predicts that some founders can navigate a difficult period, but is less certain how every mature company can regain faster growth.

He points to Adobe’s transition toward cloud software as an example of a later growth chapter, while saying companies benefit from sequencing new products before the first one matures. A dominant brand may create opportunities, but he does not know which companies will find them.

Lemkin warns founders against applying fundraising advice from the 2021 boom indiscriminately. Asking for more capital than an investor can deploy may cause a quiet rejection even when the business is interesting. He recalls Gong’s $7 million Series A in 2017 as a contrast to larger later norms.

He says his largest typical check is about $4 million, which creates substantial concentration in his fund. A $10 million raise could require bringing in other investors and a higher conviction threshold; a smaller or flexible ask may be easier to discuss. Stebbings cautions that a wide range should still reflect a coherent plan.

Lemkin aims for roughly two substantive founder meetings a week and tries to respond to good emails. He admits filtering on email quality can miss excellent founders, but says evaluating every weak introduction would consume considerable time and require more analysts.

Asked about SaaStr’s business, he estimates revenue at around $25 million for the year, down from nearly $30 million, and says the organization lost roughly 60–80 sponsors as software companies struggled. These are his own estimates, not independently verified results.

He says field marketing budgets still exist, but some customers are reluctant to deploy them. Post-lockdown events also face mixed demand: people may value a community or its contacts without wanting to attend in person. His cancellation examples are anecdotal.

Stebbings questions why Lemkin runs a demanding events operation instead of concentrating on easier content. Lemkin says SaaStr grew from meetups into a community and that large events can have an impact on participants. He also finds the challenge engaging, even when the time return is uncertain.

Lemkin does not offer a confident SaaStr revenue forecast for 2025. He describes a rough threshold at which large events can become profitable and cites higher margins at some public events businesses, while emphasizing that his description simplifies their economics.

Stebbings describes 20VC as a fund using media to find founders. Lemkin sees SaaStr as a community first, from which both investing and an events business emerged. He acknowledges that the time spent on the community may exceed what would be necessary if investment sourcing were the only objective.

He recalls operational mistakes, including an unreserved convention venue, and says a pandemic shutdown cost the business $10 million in 2020. He criticizes his experience with event-production agencies but says SaaStr has since built stronger operations and content teams. These are his accounts of his business.

Asked whether he has become a better CEO, Lemkin says he cares more about individuals but has less patience for rallying a team. At EchoSign he used to track the journey from $1 million to $10 million in annual recurring revenue on a wall and celebrate incremental progress; he doubts he would lead that way now.

For a memorable founder meeting, Lemkin chooses Parker Conrad early in Zenefits, saying he could see the future through the founder even though he did not invest. He would choose Shopify’s Tobi Lütke as a board member for candid challenge, while acknowledging they have not met.

He considers a founder’s habit of making excuses for a mediocre leadership team a warning sign. Rebuilding a team is hard, particularly when growth slows, and he says personnel decisions are nuanced; his concern is accepting the situation without confronting it.

The pair revisit a prior IPO bet that Lemkin expects to lose. They then make a $20,000 wager on whether the average public SaaS revenue multiple will return to 8 times by the end of 2025, from roughly 6 times in their discussion. Lemkin admits he is uncertain; the bet is a prediction, not a result.