Hi all,
I just wanted to quickly share a podcast from AZ16 (Andreessen Horowitz – great venture capital firm you should know) about open source monetization and the SaaS business model. Very worth the time I think:
https://a16z.com/2019/10/21/free-software-and-open-source-bu…
Some takeaways regarding SaaS:
- It’s extremely hard to operate in the cloud, you need years to become good at it → Saas is not easy!!!
- Cloud is completely different from how on-prem works; companies need a completely different skill set for the cloud; it’s also very hard to do both (cloud and on-prem)
- How did it work before SaaS: company/customer buys software and implements it on-prem; a couple years later they maybe buy that software from a cheaper alternative bc the software capabilities got commoditized; in the end, they simply hire the IT support guy and internalize the whole system – that won’t happen with SaaS!
- With Saas, everything is better: Lower churn, higher expansion rates, more longterm profits
- There is a misunderstanding that the big cloud vendors (AWS, Azure,…) are using their power in unfair ways which is why no one can compete with them; however, the truth is that the big cloud vendors are really good at doing cloud and they are the only ones that are capable to do it (again it’s not easy!) —> partnership with the cloud vendors is important for Saas companies! (and more importantly for us: Cloud vendors are actually friendly to smaller SaaS companies – the cloud kings know they can’t do every vertical and want other companies in the cloud ecosystem to succeed)
- They mentioned an interesting article about Red Hat model vs SaaS — from Peter Levine (ca 2013) „Why will there never be another Red Hat“; here is the link (haven’t read it yet but I’m sure it’s also a great read for further understanding of the Saas business model):
https://a16z.com/2014/02/14/why-there-will-never-be-another-…
Let’s try not to make ourselves crazy because of the recent share price drops. The SaaS business model is really a game-changer and (while nothing lasts forever) I think the companies we are invested in still have a long way to go. Let’s not forget that fundamentally nothing has changed with some of the favorite companies of this board. I’m excited about the upcoming earnings season. Let’s just focus on that. 
Best
Niki