Dear SaaStr: When Should We Start Pushing For Multi-Year Contracts?

Dear SaaStr: When Should We Start Pushing For Multi-Year Contracts?

For most of us: stop pushing for them in the Age of AI. The market has shifted, and fighting it costs you more than it gains.

Here’s the reality: shorter contracts are now the norm across B2B + AI, and it’s rational buyer behavior, not a negotiating tactic.

According to ICONIQ’s 2026 data, three-year contracts dropped from 28% of new logos in 2023 to 23% in 2026. Sub-one-year contracts jumped from 4% to 13% in the same period. Buyers aren’t being cautious, they’re being smart. AI replacement cycles compress every 18 months. A three-year contract signed today might lock them into a category that’s obsolete by year two. And a vendor that is no longer a leader in 10-12 months.

The only companies consistently winning longer initial commitments are the ones whose customers see undeniable ROI before the renewal conversation starts. Top-quartile companies sit at 110–123% NRR. Datadog, Figma, Databricks, Snowflake, etc. They’re not closing three-year deals on pitch decks; they’re closing them because customers already chose to expand.

What you should do instead: Optimize for NRR and renewal quality, not initial contract length. If you have 120% NRR (which is where you should be aiming at Series B) short initial contracts aren’t a threat. You earn the extension through results.

Don’t discount multi-year deals to force them. That just slows down deals today when buyers aren’t even sure where AI B2B will be in 10-12 months. And push too hard, and it creates resentful customers who resent the commitment by month 18 and churn at renewal.

Instead, invest heavily in FDEs, deployment, and post-sales. Get customers to ROI in 60–90 days. Make the renewal obvious. That’s how you win longer commitments in 2026.