Want to stay ahead of the pack?
You need to keep your finger on the pulse of the biggest SaaS trends disrupting the industry. Here’s everything you need to know.
When midnight rolls around on the 1st of January, our newsfeeds, emails, and watercooler talk are full of predictions on what SaaS trends will shape the industry in the New Year.
With Q4 coming up in a few weeks, it’s a great time to see what industry trends did change the playing field in 2022 and which ones you need to keep an eye on to grow your SaaS business.
I know what you’re probably thinking: “Q4 is a little late…”
…And you may be right, but I’m here to say, “Nay, nay.”
It’s never too late to learn what’s working in your industry and implement changes that can skyrocket your start-up from a small fish to the ultimate catch for investors.
Keep on reading to find out more.
Product-led growth’s next evolution is product-led sales
The product-led growth model (PLG) is one hot tamale. Since 2012, its market capitalization has grown from $1 billion to $687 billion in 2020.
That’s not all.
Openview says the average PLG company is worth more than the median SaaS index company.
Pretty darn impressive.
But what makes PLG such a lucrative and popular growth strategy in 2022?
To answer that question, we have to go back to the beginning.
In the early days of the PLG business model, it focused on two things:
- Offer a free trial or a freemium product
- Offer tiered pricing plans
Its success hinges on a “pull” motion that uses your software to attract a user base and relies on the buyer to self-educate and self-serve without ever speaking to a salesperson.
It’s a far departure from the traditional sales models that use a “push” motion which depends on the sales reps to find, educate and sell to users.
It’s a frictionless way of selling that compliments the modern buyer. With a linear customer journey a thing of the past, PLG empowers users to take action and shifts the priorities of your sales team.
At the same time.
Like Schrödinger’s cat.
You see, while it’s possible to initially start a product-led strategy without any SDRs, you’ll soon reach a tipping point.
You can only grow so much before you need to start selling to Enterprise clients, and that’s where the SaaS trend of product-led sales starts to come into effect.
Enterprise customers will not give you thousands of dollars without speaking to a human. Their needs are unique, and you often have to customize packages to meet their compliance requirements.
The self-serve motion of PLG won’t cut it.
It’s why top PLG companies are ditching the “no sales team” myth.
Slack (whose CEO once said, “we don’t believe in hiring sales teams”), Datadog, and Dropbox all hire 50% more salespeople yearly, and 25% of the average PLG company’s headcount is in sales.
Customer success tools take center stage
It’s the stuff of SaaS nightmares.
You’ve spent hours crafting first-page-worthy content for Google to attract the right leads. You finally convert your free trials into paying customers. Your ARR is on the rise…
…And then users start clicking on the dreaded “unsubscribe” button.
It’s like going on an amazing date, coming home with butterflies in your stomach, and then dealing with the harsh aftermath that the person isn’t too busy to respond to your texts.
They’re ghosting you.
Like the realities of the dating world, churn is unavoidable.
Luckily, it’s not totally out of your control.
Customer success is your trump card to keep users in love with your product and so obsessed with your brand that they’ll always text back within seconds of reading your message.
The importance of CX is a direct result of the PLG trend.
As a growth strategy that relies on the product to do the heavy lifting and recurring subscriptions, creating an exceptional customer experience is your golden ticket to a stable cash flow and upsell opportunities.
There’s only one small thing that SaaS start-ups tend to overlook.
Customer success tools.
If you expect your team to figure out which users are a churn risk, who needs additional support, and which accounts are prime for an upsell manually – you’re playing the game with a handicap.
You need a SaaS stack that automatically surfaces the best accounts for your CX team based on customer behavior.
Tools like Breyta can identify pre-churn behavior, give you a product and customer engagement score, and combine your data from Segment and Clearbit to help your team focus on the accounts that make the most financial sense.
Remember, if your end goal is to sell your SaaS start-up, you need low churn rates and high potential growth to turn the heads of P.E. firms.
Growth efficiency is the new "it" SaaS metric
Not familiar with the term?
It’s one of the newer SaaS trends that’s steadily growing in popularity.
Growth at all costs is no longer sustainable.
To become a successful business and attract the right investors, you must prove that your business is efficient.
I know what you’re thinking.
“We already do that.”
Maybe you have an in-house Excel spreadsheet or some other tool that helps you come up with your sales quota for the year or quarter.
However, the growth efficiency trend stems from the problem of old data. You’re constantly using outdated information to make decisions for today.
When you switch to a growth efficiency tool, you have real-time data to support your goals, and everything is based on your team’s true productivity – not a nice-sounding number.
New start-ups like Lative are popping up as a direct result of the trend.
Lative has a Growth Efficiency Metric aka The GEM Score, which calculates your organization’s sales productivity down to an individual rep level. Read our eBook to learn more about the state of growth efficiency and the GEM score.
You can compare new SDRs to your top performers, analyze each team’s performance, and see the impact of any sales enablement initiatives.
All you need to do is turn on the Salesforce integration, and you never have to spend hours updating a laborious spreadsheet again.
Vertical SaaS continues to dominate
Vertical software products are one of the biggest SaaS trends for 2022. According to Forrester’s latest Global Software Industry Forecast report, the industry is booming with a market capitalization of $650 billion.
That’s an 800% increase within a decade.
Let’s unpack everything.
Back in the day, if you wanted to create a property management system for independent hotel owners, you would need to fork out a lot of money to create a custom tool.
Today, you can pay a fraction of the cost to access a SaaS product that does a similar thing, but the product features aren’t tailored to your specific business needs.
- You need to sync your rates and availability in real-time with sites like Booking.com and Airbnb.
- Your booking engine needs to support upsells, multi-language and currency, and group reservations.
- You need credit card processing that seamlessly manages all your chargebacks, deposits, and payments.
Those niche industry features aren’t available within a horizontal one-size-fits-all solution. It’s why more users are seeking out micro-SaaS products that meet their needs.
Before you jump on the Vertical SaaS trend, consider the following:
- Target industry: Are you going after a profitable niche market?
- A high-demand service solution: Are you delivering a product that horizontal cannot offer?
- The competitive landscape: Is it for you to dominate this niche?
If you can confidently answer yes to those questions, you’re in a position to achieve the same level of success as Veeva, a vertical SaaS company in the life sciences industry and one of the fastest-growing companies in 2021.
Low-code platforms open the SaaS market to non-coders
You have a million-dollar idea for a SaaS company.
Definitely not enough for you to create an entire application.
The SaaS trend of low-code and no-code platforms opens up the market to non-coders, especially if you’re not at a stage where you can afford a software developer.
With a drag-and-drop interface, you can skip manually coding items line-by-line and speed up the process to create the core features you want in your product.
According to Research And Markets, the global low-code development platform market is showing no signs of slowing down. In 2022, it’s expected to hit $25.16 billion, and by 2026 the market is estimated to grow to $68.84 billion.
However, there are limitations.
You can’t stay on low-code software options forever. Once you’re out of the initial stage, you’ll need to invest in engineers to develop your products and grow your business.
New funding options for SaaS founders
SaaS funding is a bit like that Netflix show Love Is Blind. You have 30-days to make a connection, fall in love, propose, and get married without ever seeing the other person.
It’s scary, messy, high-stakes reality television at its best.
When it comes to start-up funding, you’re in the same boat as the contestants. You’re speed dating investors, and you need to find your perfect match with millions of dollars, your employee’s livelihoods, and your dream at stake.
If you’re part of the 30% of SaaS companies looking for funding or will be in the next 12 months, you’re probably kept up at night with thoughts like:
- How much equity should you part with?
- Is bootstrapping a bad idea?
- Where are you going to find an investor who supports your vision?
Traditionally, there have only been three ways to raise money for your start-up:
- Take out a loan
- Bootstrap your business
- Find an angel investor
Well, things are changing.
A blend of new funding options popping up that don’t require a soul contract with the devil or equity in your company.
TinySeed: TinySeed is an alternative to start-up funding. Since launching in 2018, it’s helped 80+ SaaS companies grow through funding and mentorship from other founders who have been in your shoes. You get all the pros of angel investment without the headache of traditional fundraising or the pressure to create the next unicorn.
Pipe: Pipe lets you convert your recurring revenue into upfront capital, turning your customers into investors. It enables SaaS start-ups to grow faster by collecting your annual revenue upfront while your customers still pay monthly or quarterly.
LighterCapital: Say goodbye to selling equity. Similar to TinySeed, LighterCapital allows you to expand your Saas start-up on your terms. It offers revenue-based financing where your investors receive a percentage of your gross revenue, and your monthly repayments are based on a fixed percentage of future revenue. Other financing options include a term loan and contract funding.
While a wider range of funding options is positive news, it doesn’t stop there. Unlike other industries, SaaS is bucking the decline in private market investment.
Now that isn’t to say SaaS funding isn’t slowing down. It is but at a far slower pace.
According to Carta, SaaS start-ups raised $1.04 billion in Series A deals (a 38% drop from Q4 2021), but health tech Series A funding went down by 64%.
What does that mean? There are tighter budgets, but SaaS start-ups are in favor with investors, and you stand a much higher chance of getting a slice of the pie.
These SaaS trends for 2022 tell us that you don’t need to struggle to secure funding for your growing SaaS business. There is a wider range of options, and you’re sitting on a pile of gold investors want.
Private equity firms are your ticket to early retirement
What’s your ultimate goal as a SaaS founder?
If you said, “selling my business,” you’re not alone.
The 2022 MicroConf SOIS report shows that 48% of bootstrapped SaaS business owners want to sell.
It’s not surprising.
After years of pouring money, time, and sleepless nights into a business, who wouldn’t want to walk away with life-changing money in the bank?
Luckily, it’s easier than ever before to hit your SaaS exit goal.
Private equity firms want to acquire SaaS companies with $10M+ ARR, sometimes as low as $6M – $8M ARR, and flip your business for 3x-10x of their initial investment.
You don’t need to wait until you have insane growth rates.
If you have predictable revenue, low churn rates, and a low CAC, and you’re comfortable selling for half of what the public market multiples are, you can likely find a private equity buyer.
AI writing tools are your secret weapon
The best way to attract leads to your SaaS business?
SaaS companies using content marketing see 30% higher growth rates and a 5-10% increase in customer retention rates.
…But wait, there’s more.
For SaaS companies, content marketing efforts can yield an ROI of up to 647%, and 48% of SaaS buyers consume 3-5 content pieces before making a purchasing decision.
Think about it.
The leads coming in via search results are more qualified than a random Instagram follower. The user is actively seeking out a solution to the problem you solve and has already begun their buyer’s journey.
There’s only one downside.
Content creation is time-consuming.
You need to research keywords, create an outline, write the blog post, format it, promote it, and wait for it to start ranking in search.
It’s A LOT.
To cut down on the content creation process, marketing teams are turning to Artificial Intelligence (AI) writer tools.
Fun fact: Our team at Marketsplash uses Frase, an AI-based SaaS writing tool. It helps us create outlines in minutes, find topic ideas, optimize for semantic keywords, and overcome blank page syndrome.
Despite the great content writing support it provides, you still need the human touch.
Artificial intelligence writing tools aren’t perfect, but they can help you generate content ideas in minutes, optimize your content to dominate the search results, and produce enough content to stay competitive.
The SaaS industry is not slowing down anytime soon. With the increase of remote work and more people working online, software-as-a-service is becoming essential to our day-to-day and business lives.
That’s good news for early-stage start-ups.
There’s more opportunity to launch, grow, and sell your SaaS company while making an impact and solving the world’s problems.
As we finish 2022 and head into 2023, keep these SaaS trends top of mind to curate a strategy to help you reach your business goals.