First the good news: The MSP software market is healthy, growing and essential to small businesses worldwide.
Now, the reality check: Multiple executives from multiple venture-backed MSP software companies say they are battling work fatigue and potential burnout as economic headwinds and rising interest rates pressure technology company valuations.
The unsolicited chatter surfaced during multiple ChannelE2E meetings at IT Nation Secure 2022, a conference held this week in Orlando.
Rising Valuations Made Hard Work Feel Easier
Put simply: The MSP software executives — representing multiple companies — say they didn’t realize how hard they have been working since even before the COVID-19 pandemic.
Instead of feeling the weight of the hard work, the executives from 2019 through 2021 largely focused on major outcomes like rising monthly recurring revenue (MRR) and ever-rising business valuations. All was seemingly well on the financial front. Pouring endless time into work seemed well worth it, considering the potential pot-of-gold retirement outcome.
Fast forward to 2022, and the market mood has changed. Dramatically. The strong economic tailwind from yesteryear — which seemingly made all that hard work easier — has shifted to an emerging economic headwind. Suddenly, maintaining a current business valuation is hard — and growing the valuation is even harder.
Venture Capital: Rethinking Record Valuations
The evidence? Three MSP software companies at IT Nation Secure tell ChannelE2E that they recently received Series B and Series C funding offers that were well-below their boardroom expectations.
Some of the companies in question don’t “need” to raise money and will instead burn through extensive cash on hand until as late as 2024 or so. But other firms here at IT Nation Secure are rethinking their financial models and target markets — potentially moving up-stream beyond the SMB sector in a quest for higher prices and fatter margins that may deliver a valuation lift.
Still, it’s important to draw a clear line between business fatigue and employee fatigue. Generally speaking, MSP software businesses continue to perform extremely well overall — even if some valuations are under pressure.
How Long Can I Work This Hard?
Far more importantly, it’s the employee fatigue that has me worried. People are only now beginning to realize the pandemic years left them exhausted. In some cases, those executives wrongly believed their “paper” net worth — tied up in company stock that couldn’t be sold — would continue to rise sharply.
Amid some downward pressure on valuations, some of those same MSP software executives are wondering how much longer — and just how hard — they can push themselves in pursuit of a dream exit.