Why SaaS Growth Could Accelerate in 2021: Insights from Bessemer’s Byron Deeter
Byron Deeter, a prominent investor at Bessemer Venture Partners, remains bullish on the future of cloud software—even as the pandemic-driven surge in digital transformation begins to stabilize. In a recent TechCrunch Extra Crunch Live discussion, Deeter shared compelling insights on why SaaS companies might not just sustain but potentially accelerate their growth in 2021 and beyond.
The New Baseline for Software Adoption
Deeter argues that the COVID-19 pandemic didn’t just create a temporary spike in software demand—it established a new baseline for digital tools in the workplace.
- Subscription models ensure retention: Unlike one-time purchases, SaaS subscriptions create sticky customer relationships. “They’re not going to turn them off,” Deeter noted.
- Permanent shifts in behavior: While extreme reliance on tools like Zoom may ease, these platforms have become “foundational” to modern business operations.
- Duct-tape solutions become permanent: Many companies rushed to adopt stopgap SaaS tools during the pandemic. Now, Deeter believes they’re unlikely to revert to legacy systems.
Could Growth Actually Accelerate?
When asked if Bessemer’s SaaS portfolio might grow faster in 2021 than in 2020, Deeter surprised with his response:
“On balance, there’s a real case that [the group] could grow the same or faster.”
This optimism stems from:
- Expanded use cases: Departments that adopted SaaS urgently during COVID are now scaling usage.
- Economic tailwinds: As long as macroeconomic conditions remain stable, software spending should hold.
- Innovation cycles: The pandemic accelerated product development timelines, bringing new solutions to market faster.
Beyond COVID: Lasting Trends in SaaS
Deeter’s insights extended beyond pandemic impacts to fundamental shifts in how software companies go to market:
The Evolution of Sales Strategies
- Bottom-up vs. assisted sales: Successful companies are blending developer-led adoption with targeted sales assistance.
- Flexible go-to-market: Modern SaaS companies maintain multiple customer acquisition paths simultaneously.
Rethinking the “Startup as Customer” Model
While startups can provide valuable early feedback, Deeter cautions against building a business model around them:
- Pros: Startups offer rapid feedback and are willing to churn if unsatisfied—creating strong product validation.
- Cons: Their high failure rates make them unreliable as a primary customer base. Deeter recommends targeting the “lower-end midmarket” instead.
The Founder Superpower
When evaluating entrepreneurs, Deeter looks for one defining characteristic:
“The one word would probably be ‘superpower.’ It’s notable because it’s probably different for each founder in each business.”
Whether it’s product vision, market insight, or leadership ability, exceptional founders demonstrate at least one area of extraordinary capability that gives them an “unfair advantage” in their market.
Looking Ahead
Deeter’s bullish outlook suggests that 2021 could see continued—and possibly accelerated—growth for SaaS companies that:
- Capitalize on permanent shifts in digital workflows
- Develop flexible go-to-market strategies
- Target stable customer segments beyond just startups
For entrepreneurs and investors alike, these insights provide a valuable framework for navigating the post-pandemic SaaS landscape.
