SaaStr Founder Shares Key Learnings On Pro Rata Fights And AI Price Drops
SaaStr founder Jason discusses pro rata fights, AI price drops, and the changing B2B landscape, emphasizing the importance of fairness and adaptability. His insights highlight the need for founders to navigate complex investment dynamics and leverage AI effectively.
Original reporting · saastr.com
Original: “Jason’s Takes on This Week’s 20VC x SaaStr: Pro Rata Fights, the First Real AI Price Drop, and Why $500M ARR Isn’t Safe Anymore”
Read “Jason’s Takes on This Week’s 20VC x SaaStr: Pro Rata Fights, the First Real AI Price…” at SaaStr →How this was written. Voyager Commercial wrote this article with a language model from SaaStr’s reporting (model: @cf/meta/llama-3.3-70b-instruct-fp8-fast); it describes that reporting rather than adding to it. The original, linked above, is the full story.
Key points from SaaStr’s report
- Founders should respect investors' rights, but also prioritize fairness and transparency in investment decisions.
- Pro rata rights have value and should be considered when pricing seed rounds.
- The AI landscape is evolving rapidly, with models becoming more powerful and affordable.
- Founders should focus on building their companies towards a strategic buyer, rather than relying on an IPO.
- Adaptability and resilience are crucial in the face of changing market conditions.
SaaStr founder Jason recently shared his thoughts on the latest developments in the B2B space, according to SaaStr. He discussed pro rata fights, the first real AI price drop, and why $500M in annual recurring revenue (ARR) may no longer be enough for a safe initial public offering (IPO).
Jason's learnings stem from his experience as an investor, where he was once cut out of a company's round despite being a loyal supporter. This experience taught him that founders have the final say in investment decisions, and investors should respect their choices.
The dispute between Valar and Day One is a prime example of a pro rata fight, where investors clash over their right to invest in subsequent rounds. Jason notes that if a founder asks all existing investors to waive their pro rata rights, they should not carve out exceptions for specific investors, as this can be perceived as favoritism.
Jason also emphasizes the importance of considering the value of pro rata rights when pricing seed rounds. He suggests that early investors pay a premium because they expect to participate in future rounds, and founders should factor this into their pricing decisions.
In addition to investment dynamics, Jason discusses the evolving AI landscape, where models are becoming increasingly powerful and affordable. He advises founders to test models based on their actual capabilities, rather than relying on benchmark scores, and to re-run their model costs regularly to take advantage of price drops.
Jason's learnings also touch on the importance of using decision models for yes/no calls, which can be more efficient and cost-effective than relying on frontier models. He also notes that when a big company's version of a product is a side project, it may be better to bet on a focused team that can dedicate more resources to the product.
The B2B landscape is becoming increasingly challenging, with $500M in ARR no longer guaranteeing a safe IPO. Jason suggests that founders should assume no IPO and focus on building their companies towards a strategic buyer, highlighting the need for adaptability and resilience in the face of changing market conditions.
Questions and answers
What is a pro rata fight?
A pro rata fight occurs when investors clash over their right to invest in subsequent rounds, often due to perceived favoritism or unfair treatment.
Why is $500M in ARR no longer enough for a safe IPO?
The B2B landscape is becoming increasingly challenging, with big tech companies only able to buy a limited number of midsize software companies each year, making it harder for companies to achieve a safe IPO.
What is the importance of using decision models for yes/no calls?
Using decision models for yes/no calls can be more efficient and cost-effective than relying on frontier models, allowing companies to allocate resources more effectively.
