Key Takeaways

  • The safe threshold for taking a software company public has jumped from $500 million in ARR to between $1.5 billion and $2 billion.
  • Mid-market software businesses under $1 billion in ARR face shrinking corporate budgets and a lack of exit options.
  • Intercom reached nine figures in revenue with an AI product reboot, but that milestone remains far below the $1 billion threshold needed for public scale.
  • Big tech acquirers buy roughly 10 enterprise software companies a year, leaving hundreds of mid-tier vendors stranded without an exit.

The Old Playbook Stopped Working

For years, enterprise founders targeted a clean milestone: get to $500 million in annual recurring revenue, maintain steady growth, and ring the bell on Wall Street. That target is gone. Jason Lemkin argues that public market appetite for software has changed completely.

“I wonder if when we started the show, it seemed like 500 you could IPO at 500 million,” Lemkin said. “I don't know that 500 is durable or safe any longer. You might need a billion and a half or two billion of ARR as a software company to have a safe IPO.”

While mega-cap vendors have seen their public share prices recover, mid-market vendors are stuck. Enterprise procurement teams have slashed software budgets. Seat expansions have slowed to a crawl. The public market wants massive scale and strong operating margins, not mid-tier growth stories that burn cash to maintain 25 percent growth.

Lemkin does not buy the optimistic narrative that software has moved past its downturn: “I think everyone without massive scale is living a worse apocalypse than in March or April because no one wants to buy software. Everyone's breathing a sigh of relief. I don't think we should be breathing any size of relief.”

Big Tech M&A Cannot Clear the Queue

Founders who realize an IPO is out of reach often assume a strategic buyer will step in. Rory O'Driscoll points out the math that kills that assumption.

“Big tech can only buy so many at a time because time it's a distraction,” O'Driscoll said. “So they're going to get hoovered up at the rate of 10 a year, and that's like infinite time. That's the real issue: because there's no probability of getting critical mass and scale and an exit, you're just done.”

Software has entered a mature phase where the market leaders use their cash and market cap to dominate. Meanwhile, hundreds of mid-tier companies with $30 million to $150 million in revenue are running out of steam. Even standout product execution cannot bridge the gap on its own. Intercom executed an AI native reboot that pushed the company into nine figures of revenue. Yet Lemkin points out that reaching $100 million is an entirely different universe than “building to a billion growing 50%.”

When hundreds of venture-backed software businesses need an exit and buyers purchase only 10 per year, the math guarantees that most will wait indefinitely.

What to Do With This

Review your cap table and your growth runway this week. If your financial model assumes an IPO at $500 million ARR or an acquisition by Salesforce or Microsoft, replace that exit assumption with a standalone cash-flow target. Build your operating plan around reaching net profitability before your next fundraise, because waiting for a mega-cap buyer will leave you stranded.