Introduction

The SaaS exit playbook is broken. AI now takes all the funding and focus, leaving SaaS founders without clear ways to sell or exit.

What’s the problem it solves?

For years, SaaS companies could count on being acquired or funded once they reached solid growth and profitability. But now, with investors obsessed with AI, most “pretty good” SaaS companies have lost their exit paths. Jason Lemkin explores what founders should do to survive this new reality.

Quick Summary

For over a decade, the SaaS world had a predictable rhythm: grow to $20M-$50M ARR, hit healthy margins, and buyers-private equity or big tech-would line up. That system collapsed in the AI era. Venture capital has shifted heavily toward AI, soaking up more than half of global funding. Private equity firms are more cautious, focusing only on top-performing, AI-integrated category leaders. Corporate buyers, too, are all-in on acquiring AI capabilities instead of traditional software tools.

The IPO path isn’t any easier. The bar has risen sharply: companies need $400M-$600M ARR and strong profitability to even qualify. This leaves hundreds of solid but unexceptional SaaS businesses-those growing steadily, with loyal customers and sound margins-stuck without clear exits or access to growth capital.

Jason Lemkin argues that founders must now adapt. Profitability and operational excellence matter more than chasing hypergrowth. Adding AI capabilities is essential, but must be done sustainably. Instead of hoping to be bought, SaaS leaders may need to become buyers themselves-rolling up smaller firms or owning their niche. The market will eventually normalize, but until then, founders must build real, lasting companies that can stand alone.

Key Takeaways

• VC and M&A capital has largely moved from SaaS to AI in 2025.
• Private equity is only buying top-tier, profitable, AI-ready leaders.
• Corporate M&A is focused on acquiring AI tech, not traditional SaaS tools.
• IPOs now require at least $400M ARR and 30-50% growth.
• Mid-sized, profitable SaaS companies are stuck with limited exit options.
• The focus has shifted from “grow fast” to “grow profitably.”
• AI is both the challenge and the opportunity for SaaS’s next phase.

What to do

• Get profitable or near break-even-burning cash is no longer rewarded.
• Invest in AI features that truly improve your product and workflow.
• Focus on free cash flow and real EBITDA, not inflated valuations.
• Consider acquiring smaller SaaS firms instead of waiting to be bought.
• Target vertical markets with strong customer stickiness.
• Extend your runway-assume exits will take years, not months.
• Build operational strength: >75% margins, strong retention, and 40%+ Rule of 40.
• Accept lower multiples and focus on becoming a durable, independent company.

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