The "SaaS is dead" narrative keeps spreading because it feels true. The data tells a more precise story.
18–20%
Avg revenue growth, public SaaS
70%+
Gross margins
~20%
Free cash flow margins
These are not broken businesses. They are still compounding. What has changed is how the market values "good."
The Violent Stratification
When you break software companies down by growth rates, the market's logic becomes obvious:
The median public SaaS multiple today sits around 4–5x forward revenue. But the top handful of companies trade closer to 18–22x. That spread matters more than the average.
This Is a Relative Game, Not an Absolute One
The pain in software today is less about deterioration and more about comparison. Every investment decision is implicitly relative.
The market isn't asking "is this a good business?"
It's asking "is this the best place for incremental capital right now?"
The Two Camps Software Is Splitting Into
Software as Infrastructure
Platforms at choke points: data, security, workflow, orchestration, or developer control. Benefit from AI rather than being threatened by it.
→ Premium multiples, patience, forgiveness
Software as a Feature
Useful, well-built products with steady retention and improving margins, but no path to becoming the control layer.
→ Still great companies. They get valued, not celebrated.
SaaS didn't die. It lost narrative dominance.
You either look like the future — or you look like maintenance.
Explore the SaaS Valuations Dashboard and Is SaaS Dead? tool at Value Add VC. Originally published in the Trace Cohen newsletter.