Market & TrendsMarch 4, 2026·9 min read·Last updated: March 4, 2026

SaaS Isn't Dead. It Just Isn't the Main Character.

The data tells a more precise story than the narrative. Public SaaS is still growing. What changed is how the market values 'good' — and the spread between winners and the rest has never been wider.

TC
Trace Cohen
3x founder, 65+ investments, building Value Add VC

Quick Answer

SaaS isn't dead — public SaaS companies still grow 18–20% annually with 70%+ gross margins. What changed is narrative dominance: AI infrastructure captured capital and attention, compressing median multiples to 4–5x while top infrastructure-positioned software commands 18–22x, splitting the market into two permanent camps.

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:

Above ~22% growthLow-teens revenue multiples
15–22% growth~7–8x
Below 15% growthOften near 3x

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.

Frequently Asked Questions

Is SaaS actually dead in 2026?

No — public SaaS companies are still growing at 18–20% annually with 70%+ gross margins and ~20% free cash flow margins. What died is the narrative dominance SaaS once held. The market still values these businesses; it just doesn't celebrate them the way it celebrates AI infrastructure plays.

Why are SaaS multiples so compressed despite solid fundamentals?

Multiples are relative, not absolute. Every investment decision is an implicit comparison, and AI infrastructure companies offer faster growth and structural defensibility that makes steady SaaS look like a maintenance bet. Median public SaaS trades around 4–5x forward revenue today, while top-tier infrastructure software commands 18–22x.

What's the difference between SaaS infrastructure and SaaS features?

Infrastructure SaaS sits at control points — data, security, workflow orchestration, developer tooling — and benefits from AI adoption rather than being threatened by it. Feature SaaS is well-built and retentive but has no path to becoming the control layer. Both can be good businesses, but only one gets premium multiples.

How should founders position a SaaS company in the current market?

The key question is whether your product sits at a choke point — something customers can't route around. If you're selling a workflow tool that AI could replicate or replace, you're at risk of being repriced as a feature. Founders should be honest about whether they're building infrastructure or a product that rides on top of it.

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