Podcast Summary: SaaStr 824 – "VC in the AI Era: Exactly What's Getting Funded, Why & When"

Host: Jason Lemkin, Founder & CEO of SaaStr
Date: October 8, 2025

Episode Overview

In this solo episode, Jason Lemkin draws on SaaStr’s extensive insight into B2B SaaS, founder journeys, and venture capital trends to answer a crucial question: What is actually getting funded by VCs in 2025, and why? With thousands of pitch decks and valuations reviewed through SaaStr AI’s tools, industry-wide data, and direct conversations with leading VCs and founders, Lemkin breaks down the new standards for venture investment in the era of explosive AI growth, what metrics matter most, and blunt advice for SaaS founders seeking funding in today’s environment.

Key Discussion Points & Insights

1. The VC Investment Landscape in 2025

• AI Drives the Bar Ever Higher:
  Most venture money today is flowing into a select group of hyper-growth, AI-native companies (e.g. OpenAI, Anthropic, Replit).

  • “You gotta be number one at something to stand out today.” – Jason Lemkin [00:01]
  • Traditional SaaS companies that could raise 18-24 months ago are now facing much higher bars for funding.

• Speed Matters More Than Ever:
  Iconiq’s recent data shows top-quartile SaaS companies grow from $1M to $100M ARR in about 5 years. AI-native startups are achieving this in as little as 8 quarters (2 years).

  • “Glean, AI enterprise search, got there in almost half the time… Perplexity, Replit, they can do it in less than a year, from 1 to a 100 million.” – Jason Lemkin [07:10]

• Two Categories of What’s Getting Funded – Bessemer’s Framework:
  Bessemer Venture Partners divides fundable companies into:

  • Shooting Stars: High-margin classic software ($1M to $100M in 5 years; 60%+ gross margins)
  • Supernovas: AI-natives growing far faster, often burning more cash and with lower/negative gross margins, but achieving record revenue per employee (> $1M/employee).
  • “ARR per employee: a lot of these [AI] companies are well under 100 employees as they approach $50 or $100 million in ARR.” [16:08]

2. The High Bar for SaaS Funding: Benchmarks & Metrics

• Top Quartile or Bust:
  The bar for a ‘fundable’ company in this climate is the top 25% of venture-backed peers.

  • Growth rates for companies at $50-100M ARR: 90% YoY expected
  • Net Revenue Retention (NRR): 120%+
  • Revenue per employee: $220K+
  • “If you’re in the 50 to 100 million phase… top quartile is 90% growth and 120% NRR. As you get into this growth phase, VCs are still going to be wanting you to grow almost 100%.” – Jason Lemkin [31:50]

• Valuations & Founder Expectations:
  Startups, especially in AI, are demanding much higher valuations—up to $60M post-money at early stages, sometimes aiming to triple that within a year.

  • “Some of the expectations… are utterly insane. A lot of the founders in the latest Y Combinator batches have had revenue for days and are raising at $25 or $30 million post-money valuations, sometimes as high as $60 million.” [40:13]

3. Paradoxes in the Public vs. Private Markets

• Public SaaS Companies: Lower Bars, Higher Multiples
  • Growth rates in public B2B SaaS are historically low—mid-20s percent is typical, “high growth” is now only 30% (vs. 70%+ in 2021)—but valuations (multiples) are actually higher.
  • “There’s almost a paradox here that we’re expecting less from our public companies but giving them higher multiples, but we’re expecting even more from our startup.” – Jason Lemkin [26:33]

4. The Reality Check for Founders

• Most Won’t Make the Cut:
  Only about 17% of SaaStr AI-reviewed pitch decks score “A-” or higher; B- or lower means it’ll be very hard to get funded.

  • “Most people… if the average grade is a B-, there’s quite a few Fs, and maybe that’s helpful, too, because people are delusional and we just tell you—you’re not going to get funded at that growth rate.” [54:50]

• Self-Assessment & Data-Driven Pitching:

  • Ask your own investors for an honest 1-10 rating of your fundability and real odds of raising.
  • Use SaaStr AI’s free deck review tools for an impartial benchmark—don’t go in blind.
  • “We have incorporated all these valuations, all these decks… and in just a couple of minutes we can give you an honest… score of how your pitch deck looks and how your company looks for funding.” [52:40]

5. Tactical Advice for Fundraising in the AI Era

• Be Number One at Something
  With so much noise, “category winners” are all that matter. Back up any #1 claim with actual data.

  • “What are you number one in? …Show with data, even if it’s early, what you are number one in. This will really stand out today.” – Jason Lemkin [01:24:11]

• Understand Which VC Archetype You’re Targeting

  • 80% of VCs are in “AI native or bust” mode—many will only fund hyper-growth AI companies.
  • Not every VC is that extreme, but expect many rejections if you’re building a non-AI, classic SaaS company.

• Don’t Assume You’ll Get Another Round

  • “Just because everyone on your cap table [is] saying great job… don’t assume… that the next round’s coming.”
  • Repeatedly pressure-test your fundability and plan for the possibility of not getting funded.

• Beware Dated Advice

  • Many angel investors or fund managers last actively deploying in ‘21/’22 may give fundraising targets or strategies that are now out-of-touch.

Notable Quotes & Memorable Moments

• “You gotta be number one at something to stand out today.” [00:01 & 01:24:11]
• “If you’re not in that Iconiq top quartile, be honest—it will be very hard, if not impossible, to get funded.” [01:25:45]
• “It’s just not enough. A B minus is not enough to get funded. So at least we’ll tell you so you don’t have to be blind.” [54:59]
• “[For] founders, they have something, they’re in the zone. It’s just not enough.” [55:38]
• “Don’t assume the next round is coming… just don’t assume in this day and age when everything’s going again to those [hyper-growth] ones on the left.” [01:29:45]
• “Be wary of dated advice… they just don’t know and they’re just not connected enough to what is getting funded.” [01:31:01]

Timestamps for Key Segments

• 00:01: Importance of “being #1” & sweeping changes in VC interest
• 07:10: Just how fast AI-native companies are growing; where the money is flowing
• 16:08: Bessemer’s ‘Shooting Stars’ vs. ‘Supernovas’—two startup archetypes that get funded
• 26:33: Paradox of public SaaS valuations and growth rates
• 31:50: Crunching the numbers—what ‘top quartile’ means today
• 40:13: Founder expectations vs. market reality around valuations
• 52:40 – 55:38: Insights from SaaStr’s deck-review and scoring process
• 01:24:11: Tactical, blunt fundraising advice: Be number one, or expect a tough road
• 01:25:45 – end: Final cautionary notes about the risk of not meeting today’s high bar

Final Takeaways

• The venture ecosystem has bifurcated: classic SaaS must now be exceptionally strong to be fundable; most VC dollars are hunting the next AI “supernova.”
• Speed wins: Investors seek startups growing at lightning pace, even at the expense of margins and efficiency.
• Data-driven self-diagnosis is crucial: Use honest benchmarks—either via tough investors or SaaStr’s AI tools—before burning out chasing rounds that aren’t likely to materialize.
• Be number one in something—or be prepared to slog through a lot of rejection.

For more hands-on benchmarking, pitch deck feedback, and live SaaStr AI event info, check out SaaStr’s tools and resources at SaaStr.com.