4 minutes

Is the tech recession waning?

I recently had a call with a RevOps Leader at a +$200m ARR company, and when we got to the topic of ongoing business, he mentioned something interesting.

He said that they’ve been experiencing some measure of normalcy again.

Enough that it made me wonder if the B2B Tech world is starting to emerge out of this recession tunnel.

And from what I have discovered so far, they are not alone. 

I’ve spoken with a few VCs and SaaS founders who, while being more cautious about their investments and advising companies to stay efficient, believe that SaaS companies might just walk away from this recession with a mere black eye.

Now, I think we’re still a while away until we can truly say that we’re out of the worst of it. But the market is going to bounce back eventually. And when it does, we should be ready.

So that got me thinking, how do we know we’re starting to leave this recession?

Like the first signs of spring, there are bound to be indicators out there.

One item we should look at first is one metric that, to a degree, caused the situation we are in: Inflation.

Annual change in consumer price
Source: New York Times

And see there, inflation is starting to come down again. Which has some significant knock-on effects on interest rates. Which is currently being used to put breaks on the economy. 

If inflation drops, some of these “breaks” can be removed. 

Next, let’s look into another indicator of health: layoffs in our industry. 

According to this chart, we are clearly over the peak:

Tech Layoffs
Source: layoffs.fyi

The reason why I think this is significant is that if you are in cost-cutting mode you are very unlikely to buy new stuff. 

Seeing this trend end also means the strength of the CFO in companies to say “No” will also decline.

Ok, we are over the worst of it, but when can we expect to go “back” to normal times?

“Normal” times would be driven by VC investments, so let’s look at that.

Tom Tunguz just published this here: 

VC Funding
Source: tomtunguz.com

The reason why I think this is significant is that if you are in cost-cutting mode you are very unlikely to buy new stuff. 

Seeing this trend end also means the strength of the CFO in companies to say “No” will also decline.

Ok, we are over the worst of it, but when can we expect to go “back” to normal times?

“Normal” times would be driven by VC investments, so let’s look at that.

Tom Tunguz just published this here: 

LinkedIn Poll
Source: LinkedIn

And wow! 44% are seeing positive signs. 

It’s certainly not everyone. But almost half is much bigger than at least I expected. 

Sooooo, what exactly are you telling me here, Mister Toni?

Well, I think that:

1. There are clear signs that we are over the worst of it (pending the next global disaster).
2. We won’t return to 2021 levels of funding for a while still, maybe never.
3. So adjust to that.But people are buying software again, and this will continue to improve, so let’s stop using this as an excuse.

And then there is one overall thought:

What we are seeing here is an overall correction. This means this is the new baseline. Sure, some metrics will tick up over the coming months, but the expectation to see efficient growth is here to stay. I have no doubt about that.

You might think that this is a Growblocks plug – and sure. But I honestly believe that teams who spend like it’s 2021 will fail going forward.

This revenue letter was sent 20th of April 2023. Want it in your inbox? Sign up here.