Cloud Stocks: Which SaaS Players Will Win In PaaS

 

At the end of 2020, I wrote Big Idea 2021: SaaS Companies Will Create 10 Million Jobs with the central thesis that SaaS players would evolve into PaaS to create deeper moats around their core market positions and gain access to the related force multiplier.

Photo by Scott Webb on Unsplash

To recap on the assumptions:

  • IF 1000 SaaS companies open up their platforms as a service, PaaS, as Salesforce.com does, by 2025
  • IF each platform lets startups sell through its marketplace, as Salesforce.com does, by 2025
  • IF each platform empowers 1000 startups to build on its stack by 2025
  • IF each startup reaches $1M in annual revenue by 2030
  • IF each startup hires an average of 10 employees by 2030
  • 1000 startups x $1M in revenue on each PaaS platform/marketplace => $1B in total revenue for each platform ecosystem
  • 30% platform fee => $300M revenue for the SaaS company that owns the platform
  • $300M revenue => $3B+ in market cap gain for each SaaS player
  • 1000 SaaS players x $3B+ = $3 Trillion market cap gain for the SaaS industry 

As you may have followed in the ensuing discussion, my assumption is that the trend would follow an 80:20 rule, with 20% of the SaaS companies becoming high performing PaaS players with robust developer eco-systems. In other words, around 200 companies would drive the industry trend forward.

My assumption is that these 200 companies have already achieved a certain scale, most likely, $100M+ in ARR.

It is, however, not the case that the top 200 SaaS players are currently ALL working on PaaS. Very few, in fact, have fully fleshed out PaaS strategies. Fewer actually have any developer ecosystem to write home about. I heard through my network that Twilio is generating $100M in PaaS ecosystem revenue. Shopify has about 4k developers, Atlassian has 25k. These are the frontrunners, besides, of course, Salesforce.

To assess which SaaS companies are likely to successfully transition into PaaS leaders, I use the following framework:

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Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own ...

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