Written by Erik | Haven Commerce LLC
Why Hundreds of Perfectly Good Businesses Are Trapped Inside the Wrong Structure
There’s a word I keep using with GPs and founders that makes them uncomfortable at first: stuck.
Not failing. Not pivoting. Not “in a tough market.” Stuck.
The discomfort is specific. “Failing” implies the business doesn’t work. “Stuck” implies something external is preventing a business that does work from going anywhere. That distinction matters, because the fix is completely different.
This guide is about what stuck actually means, why it’s more common than anyone talks about publicly, and what changes when you start treating it as the structural problem it is rather than an operational one.
A stuck SaaS company has a product with real customers and real revenue. It probably has reasonable gross margins — 70%, 80%, maybe higher. It might even have meaningfully improved its unit economics over the past 18 months through hard cuts and difficult decisions.
But the gap between where it is and where it needs to be to justify the next round (or the last round’s valuation) is too wide to close with the existing resources and structure.
The business isn’t dead. The entity might be.
That’s the distinction most conversations skip. The business — the product, the customers, the recurring revenue, the institutional knowledge embedded in the team — has real value. The entity wrapped around it — the cap table, the vendor contracts, the option pool, the cost structure sized for a growth trajectory that never materialized — is what’s broken.
Fixing an operational problem won’t solve a structural one. That’s why so many founders spend two years cutting costs, improving retention, and repositioning the product, and still feel like they’re running in place.
To understand why stuck SaaS is a widespread problem right now, you need to understand what happened in 2020 and 2021.
Capital was cheap. Revenue multiples were at historical highs. A SaaS company growing 80% year-over-year could raise a Series B at 30x ARR. That valuation implied a specific growth trajectory: continued high growth, a path to $50M or $100M in ARR, and an exit at a substantial premium to the round price.
The funding assumptions were baked into everything: the headcount plan, the office lease, the product roadmap, the option pool, the liquidation preferences in the cap table.
Then rates changed. Growth slowed. The next round didn’t come.
The 2021-vintage SaaS company that raised $12M at a $50M valuation is now sitting on $3M ARR with flat growth and $1.5M in monthly burn. The math that made the cap table rational in 2021 doesn’t work anymore. But the cap table, the contracts, and the cost structure are still there, exactly as written.
That’s what created the current inventory. Hundreds of companies with real products and paying customers, structurally frozen because the entity around them was designed for a world that no longer exists.
Here’s an exercise I do with every founder and GP I work with early in an engagement. I ask them to value the business twice.
First, as it is today: the “as-is” number. For a typical stuck SaaS company, this means applying a realistic multiple to depressed ARR, adjusted for flat growth, elevated churn risk, and a demoralized team. Usually 1x to 2x ARR, sometimes less if the cost structure is badly bloated.
Second, as it could look after a restructuring: the “restructured” number. Same core product. Same customer base. But with the cost structure right-sized, the cap table cleaned up, incentives reset, and the product focused on the 20% of features that drive 80% of retention. Usually 4x to 8x ARR, depending on the market and the quality of the core product.
The gap between those two numbers is what I call the value gap. And most of the value in any restructuring is captured by closing it.
A $3M ARR company valued at 1.5x is worth $4.5M today. That same company, restructured, profitable, and growing at 20%, might trade at 5x or 6x. That’s $15M to $18M. Same product. Same customers. Different structure around them.
The value gap isn’t hypothetical — it’s the practical difference between a transaction that can close and one that can’t.
When a GP says “the company isn’t working,” they’re usually collapsing four separate things into one diagnosis. Breaking them apart changes what solutions are visible.
The product. This is the recurring revenue, the customer base, the IP, the gross margin engine. In most stuck SaaS companies, this part has real value. $2M ARR at 85% gross margins and 90% net revenue retention is an asset someone would pay real money for — if they could access it cleanly.
The cap table. This is the set of contracts that determine who gets what, who can block what, and who has an economic incentive to do what. When the company was worth more than the total preferences, these contracts were invisible. Now they’re the entire problem.
The cost structure. The team and infrastructure sized for a company three times this size. Often 40% to 60% higher than it needs to be to operate the core product profitably. The cost structure is drag, but it’s fixable drag.
The contracts. Customer agreements with below-market pricing locked in for two more years. Vendor commitments with early termination penalties. Employment agreements with severance triggers. These create switching costs that make restructuring expensive and slow — but they’re knowable costs, and most of them are negotiable.
When boards talk about “the company,” they usually mean all four of these as one undifferentiated blob. That framing produces only two visible options: raise more money or sell. Neither works in a stuck situation.
When you separate the four components, new options appear. You can restructure the cap table and the cost structure without touching the product or the customers. You can sell the product assets through an assignment process while the entity is dissolved. You can strip back to the core product, exit three legacy product lines, and renegotiate two vendor contracts — and the result is a different company than the one you started with, one that can actually attract a buyer.
The natural question is: if there’s value here, why doesn’t someone capture it? Four reasons.
The cap table blocks transactions. A later-stage investor holding blocking rights won’t approve a transaction that doesn’t clear their preference. If the enterprise value is $8M and the preferences total $20M, no deal clears the stack. The investor can block any exit, and their rational strategy is to wait and hope rather than accept a realized loss today.
Nobody has the bandwidth to run the process. The GP is managing 8 other boards. The founder is running the company. Running a proper strategic alternatives process — building the model, preparing materials, talking to potential acquirers, managing the preference negotiation — takes 3 to 4 months of focused effort. Nobody at the table has that capacity.
The operational access problem. Getting an accurate picture of a stuck company’s true financial position, asset catalog, and contractual obligations requires digging into systems the board doesn’t have access to. The founder produces optimistic numbers by default. The VC sees the company for two hours a quarter.
Sunk cost psychology. Writing down a position triggers LP reporting consequences, partnership dynamics, and personal accountability. It’s easier to let it drift another quarter. Maybe something changes.
These four factors compound over time. Every quarter of drift burns cash, loses talent, hardens the preference stack negotiation, and shrinks the set of viable options. The market doesn’t self-correct because every individual stakeholder has a rational reason to defer.
The moment a board agrees that a company is stuck — not struggling, not in a tough market, structurally stuck — the conversation changes.
“Stuck” implies a resolution exists. You just haven’t found it yet. That’s a fundamentally different frame than “failing,” which implies the situation is terminal.
Structural problems have structural solutions. The cap table can be recapitalized. The cost structure can be right-sized. The contracts can be renegotiated. The product can be isolated from the entity dragging it down.
None of this is easy. Most of it requires hard conversations with people who have contractual rights they’re reluctant to waive. But there’s a playbook, and it’s more reliable than most people assume.
The five guides in this series walk through the mechanics in detail: how the cap table creates deadlock and how to break it, the four resolution paths and the criteria for choosing between them, why incentive collapse makes execution harder than it looks, and what a structured diagnostic actually produces and why it changes board conversations.
If you’re a GP looking at a position that matches this description, or a founder who’s done the operational work and still feels trapped, the starting point is the same: get an honest, independent picture of where the company actually stands. That’s a two-week exercise. The decisions get easier once you have real data.
Ready to talk through whether this framework applies to your situation? . No commitment — I’ll walk you through what an assessment would look like for the specific company you have in mind
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