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3 minute read / Dec 19, 2019 /

5 Predictions for 2020

Here are my 5 predictions for 2020.

The direct listing becomes the standard way for startups to go public in 2020. The idea has been proven by Slack and Spotify, and many others will follow. Most startups at IPO have plenty of cash and don’t need to raise more in the public markets. The direct listing enables them to go public without raising capital.

The M&A market continues to surge. Software M&A in 2019 reached about $170B up from $136B in 2018, up 25%. With SaaS penetration roughly 20-30% by our estimates, there’s several hundred billion in market cap to be created in the next few years. And incumbents desire as much of that as possible for themselves. I’ll guess a 15% increase from here or about $200B.

Distributed becomes the norm. Most startups will be distributed (have several offices) before they reach 50 employees. Across our portfolio, we’re seeing this. High costs of living plus modern collaboration tools, changing preferences, and startup success in other geographies push this trend into the mainstream.

Public software multiples remain at elevated levels. I think the median software multiple remains around 9x, and the bull market continues. The monetary policy of low interest rates and potential liquidity injection into the repo market by the Fed bolsters the public markets and offsets volatility from politics.

Fundraising environment remains strong. First Round published their annual report. In it, 65% of founders believe the fundraising market in 2020 will present more challenges than 2019. I’ll take the opposite perspective. The IPO window will be open and the list of blockbuster companies is long. If a few of those IPOs do well, greed will sustain market valuations.

Here are my 2019 predictions and my analysis of them. I count 2.5 wrong and 3.5 correct.

The M&A market slows meaningfully. Dead wrong. The M&A market increased by 25% and the multiples were strong. PE played less of role than 2018, when they spent 50% of the dollars, and strategics stepped up to fill the void, and then some.

The IPO market remains open. Correct. The IPO market was open. It rewarded companies with better gross margins (typically above 50%). Uber, Zoom, Pinterest, PagerDuty, Crowdstrike, Slack, and many others made a great list.

Blockchain technology finds its second killer application. Miss. BTC/USD prices are down 30% at least. The ecosystem continues to innovate but the second killer app (currency being the first), hasn’t yet been found.

The Monoclouds continue to challenge the open source ecosystem by offering hosted services of popular projects. Right on. Look no further than AWS Re:Invent where Amazon announced an entire suite of Machine Learning tools that compete with nearly every player in the ecosystem in every level of the stack.

Startups begin to siphon off important but underserved segments of SaaS incumbent’s customer bases. True but hard to judge.

Data engineering is the new Customer Success. Data engineering became an important movement in 2019, continuing the evolution from 2018 and beyond. There are podcasts about it, and it’s more recognized as a discipline.


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