Let’s talk about the truth about how stakeholders make money, why SAAS has no ability to resist risks!

I don’t know if you have ever thought about this question: whose money do SaaS entrepreneurs make? Why is the SaaS industry in such a state of wailing and without any ability to resist risks during the crisis?

If you figure out who SaaS companies make their money from, you will understand why SaaS companies are having such a bad time this year!

I have been running around the first-tier markets recently, and I can conclude that China has very good software that solves customers' business problems, and there are hundreds of thousands or even millions of customers who have purchased the software.

This type of software also requires annual renewal. Are they considered SaaS? If so, why can’t we see them? If not, what are they considered?

Starting from licensing software, a large number of Chinese companies have made their first pot of gold by relying on software, such as: UFIDA, Kingdee, Xunjie, etc. Even if the software is developed by a single user, there are people who can earn millions or tens of millions a year.

On the contrary, when it comes to the high-end SaaS field, our company is not making money, business is not improving much, and more and more companies are going bankrupt?

To clarify the above questions, we need to figure out whether SaaS is a software product or a financial product.

Analyzing the thinking of domestic SaaS entrepreneurs, it is found that they probably borrowed the thinking of APP. First, they make a product, then acquire a wave of customers, go to the capital market for financing, quickly recruit people, expand more products, and then reach a certain scale, and then go to the capital market for financing again. They keep going back and forth like this until the company is listed.

Do you still think that SaaS is a pure commodity?

Then, the core employees of SaaS must be basic company + options. After all, options are the only way to achieve financial freedom. If the boss has a conscientiousness, he can cash in the company's options in the later stage, still using the company's valuation. The basic salary of the founder of SaaS is regulated by investors and is generally not too high. So what exactly does he make money from?

As the No. 1 person in the company, the founder holds equity, and the realization of equity must be completed through the company's valuation. The funds invested by investors in the company are also exchanged for equity, and the realization of equity must also be completed through the company's high valuation.

You will find that the core employees, founding team and capital, and the final monetization model are all closely related to the company's valuation. Therefore, SaaS companies and products have the attributes of capital. As for whether the business model is successful, whether the customer renewal rate is sufficient, and whether the product functions are complete and sufficient, they become less important in the face of capital.

For products and companies with capital attributes, everyone expects the company's pie to get bigger and bigger, until the IPO, when the capital can be cashed out; the founding team can have others hold the shares and realize part of the cash; while the core employees have to endure the cash-out cycle.

Therefore, you will see that as long as a company has raised funds, it will begin to expand into multiple product lines and recruit people on a large scale. Some companies have no idea how to expand their businesses, but they are just trying to expand their business.

However, in this snowball logic, who actually pays for the final customer? It is the company's front-line employees, those who receive a basic salary and work overtime every day. They are the ones who are ultimately responsible for the customer.

Therefore, you will see that a large number of SaaS products are particularly difficult to use, because the people who create and plan these products may be recent college graduates, while the real middle-level managers are busy reporting and managing upwards.

In the logic of snowballing, the company cannot withstand any disturbance. Once it encounters a problem, the company will lay off employees. When the company is expanding on a large scale, it only looks at the cash on the books. As long as there is money, it will expand, and if there is a shortage of money, it will lay off employees.

Therefore, SaaS products eventually became financial derivatives. Who would still work hard to make products and provide solutions for customers? Most people put their energy into how to achieve rapid expansion. When encountering black swan events and economic downturns, we will know who is the real warrior and who is swimming naked in the emperor's new clothes.

During this economic crisis, founders need to change their mindset from finance to business operations, and their products need to change from rapid expansion to self-reliance. A considerable number of companies will be eliminated in this round of sand washing.

In the future, you will see at a glance what kind of companies can survive.

Finally, think about a question: Do you think the founders make money during the rapid expansion of the company?

Regardless of whether the company makes money or not, as long as the company reaches a certain scale, such as round C and round D, they must have made money. They make money from equity premium. Early investors can choose to exit in a certain round of financing to realize cash income. Similarly, founders can release their shares in exchange for a considerable part of the income.

Therefore, SaaS, which was originally a product that could solve customer problems, has instead become a game for capital . It is no wonder that most companies are rapidly expanding their company size by incubating products and have no ability to fight risks. It is no wonder that the SaaS industry has been wailing in the past two years.