Category: growth
June 20, 2024 SaaS Capital : What’s Your SaaS Company Worth?
Valuation Multiple = -2.43 + (0.19 * SCI) + (6.21 * ARR Growth Rate) + (4.38 * NRR Rate) (read more…)
April 26, 2024 SaaS Capital : 2024 Benchmarking Metrics for Bootstrapped SaaS Companies
The median growth rate for bootstrapped SaaS companies with $3M to $20M in ARR is 30% while those in the 90th percentile are growing by 75%. The median Net Revenue Retention (NRR) for bootstrapped SaaS companies with $3M to $20M in ARR is 100% while those in the 90th percentile report NRR of 120%. (read more…)
April 1, 2024 SaaStr : The Most Important SaaS Metric of All: Net New Customer Growth
The leaders in SaaS and Cloud keep new customer count up in the double-digits … even at billions in ARR. The averages: + 14% new customer count growth + 23% ARR growth even at + 1.25B ARR on average But that’s the average. You want to do better than that, given that the average public SaaS company only trades at 6x ARR. So aim for 20%+ new customer growth at scale ($100m+), and 50%+ as you approach $50m ARR. Below that is just too low. Your present may be secure, but your future is at high risk. And try to keep your customer count growing at least 50% as fast as your NRR, higher if you are SMB. That ensures you have a future, and you aren’t overly reliant on upsells from the base. (read more…)
March 14, 2024 SaaS Capital : The Rule of 40 is Dead… Long Live the Rule!
For companies at least 2 years away from an exit transaction, grow as sustainably fast as your expected access to capital will allow you in your chosen market, and burn as much cash as you can access. For companies with an exit horizon within 2 years, get to breakeven to own your destiny. (read more…)
CATEGORY: growth, resilience, SaaS
November 16, 2023 SaaS Capital : What is the Average Deal Size for Private SaaS Companies in 2023?
Deal size is correlated with company size. For example, companies with ARR $1 – $3 Million in ARR show a median ACV of $16,197 while companies with ARR of $10 – $20 Million show a median ACV of $35,831. For all but one company size (those with ARR $5 – $10 Million) ACVs generally declined vs. 2021. (read more…)
CATEGORY: growth, resilience, SaaS
August 29, 2023 Iconiq Capital : The New Era of Efficient Growth
2023 has seen continued deterioration in top-line performance as the macro environment continues to be challenging for SaaS businesses. While topline growth has fallen across the board, early-stage companies saw the biggest impact to ARR growth, falling from peak levels of 200%+ YoY growth to 111% YoY as of 1H 2023. Median net dollar retention has also been impacted, falling from peak levels of 130+% in 2017 to ~105% as of 1H 2023. As of June 2023, forward revenue growth is the primary driver of valuation in the public markets. Coefficients measure the slope of the linear relationship between different variables. From December 2021 to June 2022, the relative importance of profitability increased significantly. FCF margin had a larger impact on public multiples than revenue growth in June 2022, as shown by the greater coefficient in the table above. However, the balance has shifted back towards growth as the primary driver of valuation. As of June 2023 revenue growth once again had a larger impact on public multiples than FCF margin. (read more…)
CATEGORY: growth, profitability, SaaS, valuation
August 8, 2023 Bessemer Venture Partners : The Cloud 100
The macro background has nonetheless hurt the average Cloud 100 company. For years we saw growth rates increase, but in 2023, the average growth rate for a Cloud 100 company – the 100 best private companies in the world – has been nearly halved. After years of defying gravity and reaching record highs, headwinds eventually caught up with Cloud 100 fundamentals. The average Cloud 100 revenue growth rate fell significantly to 55% within the year, with the growth rate of the top quartile companies falling to 70%, once again reinforcing the extremely challenging year that the world’s best cloud companies had to deal with. (read more…)
CATEGORY: growth, resilience, SaaS
May 12, 2023 SaaS Capital : SaaS Capital 2023 B2B SaaS Retention Benchmarks
Across all SaaS companies, the 2023 median net retention is 102%, which is unchanged from 2022. Median gross retention is 91%, also unchanged from the previous year’s survey. One of the biggest takeaways this year is the evolving relationship between median net revenue retention and ACVs. Historically, the data showed little correlation. Over the last few years, we have seen signs that the highest ACVs showed higher median net revenue retention. This year’s data showed a direct, positive relationship with median net revenue retention rising as ACVs increase. Growth rate continues to be positively and exponentially correlated with net revenue retention, while gross revenue retention is a “table stakes” benchmark – to have a shot at performance parity with your peers, GRR must be at least 90%. Companies that primarily use month-to-month terms and annual contracts show median net revenue retention and median gross revenue retention that is essentially the same at 100% and ~90% respectively. (read more…)
May 6, 2021 Aaron Dinin via Medium : I Sacrificed a $50 Million Company to Chase a Billion Dollar Business, and It Didn’t End Well
I didn’t know it at the time, but, once I took venture capital, it meant I had to start operating like a venture-style company regardless of whether it was appropriate for the type of company I needed to build. That meant operating at a loss. That meant pumping tons of money into growth at the expense of creating a stable and maintainable infrastructure. That meant hiring lots of people. That meant scaling as fast as possible. That meant getting on the VC merry-go-round and never being able to get off.
There was a consequence to those decisions. As the VCs who rejected me recognized, the market I was chasing couldn’t support the type of venture-backed, billion dollar company I needed to build. As a result, the company that should have been a successful $50 million dollar company that I would have been thrilled to own never materialized. Instead, I had a company that failed to become a billion dollar company.
While not ideal for my investors, the outcome certainly wasn’t devastating. They expect most of their investments to fail, and, when one does, they get to focus their attention on other investments. But it was a much worse outcome for me. I only had one company, and, when it failed, I didn’t have anything else.
(read more…)CATEGORY: growth, leadership, resilience
March 8, 2021 Sammy Abdullah via Medium : Net dollar retention from 59 SaaS co’s
Focus on the customers that matter. You shouldnt care so much about losing customers that weren’t a good fit (every SaaS company is guilty of signing up customers they shouldn’t have), whereas you should obsess over customers you lost that are a good fit. Creating real value means driving upgrades. The difference between 90% gross dollar retention and 95% gross dollar retention is meaningful, but not huge. However, the difference between 99% net dollar retention and 147% net dollar retention is massive. Net dollar retention needs to be above 100%. SaaS is a beautiful business model when net dollar retention is 100% or higher. It means you’re effectively keeping the customer for life. (read more…)