The 5-Question Framework for SaaS Investment Decisions
The SaaSindustry is undergoing a permanent structural transformation. The traditional middle market—companies with $20-100K ACV, sales-assisted motions, and feature-based differentiation—is being crushed between two extremes.
This is not a cyclical trend. It is a fundamental restructuring driven by four forces that only intensify over time:
AI commoditization has collapsed feature development timelines from years to days
Zero-marginal-cost economics drives prices toward zero at the Floor, or forces irreversibility at the Ceiling
Buyer sophistication has eliminated information asymmetry
The end of ZIRP means capital demands efficiency, not growth-at-all-costs
These forces are impersonal. They don’t negotiate. They don’t make exceptions for great teams, big markets, or compelling narratives.
The Outcome Space
The outcome space has collapsed into three possibilities: Floor, Ceiling, or death.
Floor companies compete on viral growth, zero CAC, and massive scale at near-zero prices.
Ceiling companies compete on irreversibility, deep integration, compounding data gravity, and organizational embedding that make switching unthinkable.
The middle—where most SaaS companies have historically lived—is structurally unviable.
The Structural Lock-In Diagnostic
The Diagnostic exists to answer one question: Where does this company actually live? Not where management says it lives. Not where the pitch deck positions it. Where the physics of the business model place it.
The five questions can be answered in 30 minutes. They should be asked in the first meeting, not after weeks of diligence.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
