Three bubbles. Three corrections. One pattern nobody is talking about, yet!
Tulips. Circa 1636. 55x.
Dot-com stocks. Circa 2000. 45x.
SaaS. Circa 2020. 20x.
The SaaS correction is bigger than most people realize. Revenue multiples peaked around 20x in 2021. By March 2026, the median dropped to 3.3x. Over 80% compression. $1 trillion in SaaS market cap erased in Q1 alone.
Look at three names everyone knows.
HubSpot. Peaked at $852. Market cap $35B. Now $201. Market cap $10B. Down 71%.
Atlassian. Peaked at $483. Market cap $116B. Now $82. Market cap $22B. Down 81%.
Salesforce. Peaked at $312. Market cap $250B. Now $180. Market cap $171B. Down 32%.
All peaks from November 2021. All three grew revenue since then. All three lost massive market cap.
People blame AI. AI is part of it. But three structural cracks were already there before AI entered the picture.
First, free money ended. From 2020 to 2022, interest rates were near zero. When money costs nothing, future revenue is worth almost as much as today's revenue. That is why investors paid 20x for SaaS companies that were losing money. The math worked at 0%. It broke at 5%. The same company generating the same revenue was suddenly worth less by pure math.
Second, COVID pulled forward years of demand. Every company bought the same software at the same time. Remote work. Digital transformation. Growth rates spiked to 30%+. Investors priced that growth as permanent. It was not. Growth has decelerated every quarter since. Now companies are guiding under 10%.
Third, the market hit a ceiling. 96% of US enterprises already use SaaS. The average company runs 305 tools. There is nobody left to sell to. Growth can only come from expanding inside existing accounts. That is a fundamentally harder story than the one investors were paying for.
AI landed on top of all three of those cracks. And it added a fourth.
The thing that nobody is talking about yet is that the screen is losing its audience.
People's eyeballs are moving into the LLMs. That is where they ask questions. Give instructions. Make decisions. They are sending AI agents into the software on their behalf. Nobody wants to update a CRM. Nobody ever did. AI is faster, more accurate, and more consistent. I said this out loud to my team last week. I don't trust your CRM updates because every one of you has a different spin on things. But AI, it keeps things consistent.
We built CRM Magic for our customers two years ago. Exactly this concept. Too early. Now rebuilding it because customers are finally asking, and let's be honest, the AI technology is so much better.
Four forces. Not one. Free money ended. Demand was borrowed. The market is saturated. And the screen started losing the audience it was built for.
AI will take humans out of traditional SaaS products, and you will need to figure out how to connect your products to LLMs and enable agents to use them on humans' behalf. What does that mean? That means CLI and MCP. It's okay if you don't have it today, but if it's not on your roadmap for Q3 or Q4 this year, you will lose ground.
Kathy
The AI Boss