If demand for database products is/was inelastic, why are so many SaaS data vendors not profitable after IPO? (Elastic NV [0], Confluent [1], Snowflake [2], ...) They should just be able to increase their prices to become profitable. But they don't, ergo must be competing on price.
The article doesn't claim that demand (or pricing) is inelastic in the data space. It makes the point that VC funding has inflated price levels across the board, similar to how college tuitions rose dramatically after student debt became widely available. There are still differences between college tuitions, but overall tuitions might be multiple(s) higher compared to what the price would have been if there was no (cheap) financing available even.
Now that VC funding is mostly on the sidelines the question is how this will play out further.
> It makes the point that VC funding has inflated price levels across the board, similar to how college tuitions rose dramatically after student debt became widely available.
What's the evidence for that assertion? For the analogy to work VC funding would need to be a dominant factor in IT spending. Last year it was about $200B vs ca. $2T of overall IT spending. [0, 1] But VC spending is not IT spending--in fact it's probably on the order of 10% because most of the money goes to things like R&D and customer acquisition. So it's fair to argue VC spending has inflated salaries but it does not seem like enough to move the needle on IT spending in a material way.
I'm personally skeptical of the argument from the cited article because I run a company that does pretty much exactly what IOMETE is proposing. In practice, there are many confounding factors.
1. The database market is very competitive. There are very few segments that don't have 2, 3, or more substitutable products for green field applications. For existing application there are high switching costs that mute impact of lower product prices. In plain English: we lose those deals.
2. We've seen impact from startups losing funding, but it does not affect prices so much as revenue when customers simply disappear. The same thing happened at the end of the Internet boom in 2001/2.
What will make a difference in this market is offering a completely different model, such as fully open source projects that promote competitive vendor offerings without high lock-in.
p.s., Thanks for the Snowflake numbers. I just went off their last reported results.
Now that VC funding is mostly on the sidelines the question is how this will play out further.
Haven't studied Elastic and Confluent, but Snowflake seems now profitable (5%) with 25% free cash flow. See p.28 of their last investor presentation. https://s26.q4cdn.com/463892824/files/doc_financials/2023/q4...