Good morning! I am writing to you in the minutes before I have to pack up my writing and podcasting setups so that I can catch a few planes to San Francisco for Early Stage. (I’m moderating two sessions, including one on scaling ARR, so come hang!) My colleague and frequent collaborator Anna Heim wrote the real Exchange today and it’s a banger. Consider this some sort of bonus.

The SaaS selloff may be behind us.

Declines in the value of technology stocks have subsided, with public cloud companies appearing to have found a new trading level that they can somewhat comfortably hover around. This is at once good and bad news for technology companies more generally, and tech startups in particular.

It’s good that the rapid, kind of terrifying valuation declines we saw among modern software companies in the final months of 2021 and the opening months of 2022 have halted. And it’s somewhat unfortunate that the market repricing of the value of software appears ready to stick.

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More simply, the decline in the value of annual recurring revenue, or ARR, may be slowing, but there’s also scant indication that we’re about to see a rebound.

Bessemer’s Janelle Teng recently posted a useful analysis that digs into a few macro factors that have been pushing the value of tech stocks around. The key is the inverse relationship between interest rates and tech stocks: The higher interest rates go, the lower software stocks go, more or less. (The mechanics behind the dynamic are somewhat immaterial for our purposes today; it’s the relationship that matters.)

Ironically, interest rates may be the best reason to expect that most of the selloff in software stocks is behind us.