I have been keeping both ears to the ground (a very difficult thing to do) with respect to the software/SAAS economy for the last 5 quarters now (ever since Lehman Brothers filed for bankruptcy in late September ’08). What I have seen, based on conversations with as many people/companies that are willing to tell me anything and a lot of analysis of economic data, is 4Q08 being okay followed by a tough Q109, an even tougher Q209, a more stable Q309 (compared to Q209) and what looks like a relatively strong Q409 (compared to Q308).
The views from my network at this point range from extremely positive to cautiously optimistic, which is a huge improvement from six months ago and, as the final sales numbers for the 4th quarter continue to roll in, I believe that we are going to see positive and higher top line growth coming from software/SAAS companies. More importantly, we are going to see top line growth coming from new customers and expanded product use from existing customers, which is the most important sign of recovery in the software economy.
What next? Part of the 4th quarter result are from the 4th quarter effect and part are coming from increased spending on software (it is difficult to separate the effects given the characteristics for the year), but I expect that Q1010 is going to be a LOT stronger than Q109 and that as the year progresses the software economy is going to continue to grow at at least reasonable rates (I am hoping for a “rebound” growth year, but we will see what happens and I don’t want to get too far ahead of the economic realities).
Clearly as a venture capitalist that wants his portfolio companies to do well and wants to engage in more growth capital investments, I benefit from this prediction and need to be optimistic, but more tom toms are beating louder and louder on the 4th quarter results being positive and I suspect that this is going to continue…