December 1, 2023 Meritech Capital : Public SaaS Comparables Table

1. 93% of companies have YoY Implied ARR growth <40%
2. 74% of companies have FCF margin <20%
3. 26% of companies are achieving Rule of 40
4. 39% of companies have returned <1x since IPO

CATEGORY: profitability, SaaS, valuation

November 8, 2023 Open View Partners : 2023 SaaS Benchmarks Report

1. While growth is much harder to come by in 2023, there are pockets of resilience amid the doom-and-gloom.
2. The North Star for many has become ARR per FTE, which reflects the productivity of your team. We’ve seen big increases in ARR per FTE year-on-year.
3. Positioning yourself as “AI” doesn’t impact growth. But monetizing AI does.
4. To drive productivity, companies need efficient product-led growth (PLG), expansion within the customer base, and improved operations.

CATEGORY: leadership, profitability, resilience, SaaS

October 5, 2023 SaaSletter : 2010 – 2021 SaaS Industry-wide Benchmarks

Positively, this speaks to:

• SaaS applications generating positive customer ROIs to earn land and expand within orgs
• Broadening of product suites, leading to larger “expansion surface areas”
• The increased revenue-generation emphasis of customer success as a function
• Installed base math: the early era of SaaS had definitionally a small installed base to expand upon. Whereas today’s SaaS vendors have decades of installed bases to expand from →that historic-to-new ratio imbalance mathematically will favor expansion as a driver.

• Challenges in winning new logos: CAC CAGR of 7%
• With field sales getting harder: CAC CAGR of 7% (vs 4% CAGR for inside sales)

CATEGORY: profitability, 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

September 20, 2022 Pitchbook : Distressed venture is coming to save your orphaned startups

"Our goal is to find companies that are fundamentally good businesses with business models that make sense and are revenue-generating. They just need a second chance so that they can grow profitably and sustainably, and then have a meaningful exit for founders and investors."

CATEGORY: alternative financing, profitability, resilience, VC

July 6, 2020 Avi Eyal via Medium : Burn Baby, Burn

Revenue often costs too much.  One will often face a tradeoff between cash flow paid annually at a discount and higher revenues from customers.  Revenue is Vanity, Profit is Sanity …. and Cash is Reality!  Cash upfront helps fuel growth which has a multiplier effect — especially if the business has high gross margins. (read more…)

CATEGORY: customer acquisition, growth, profitability

May 18, 2020 The Verge : A pizzeria owner made money buying his own $24 pizzas from DoorDash for $16

The answer isn’t clear because we’re very far from the old ways. By the magic of venture capital, some businesses don’t have to make money to survive. And that’s upended things for everyone. “Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing, failing, and evolving, they’ve been subsidized into market dominance,” as Roy puts it. “The more I learn about food delivery platforms, as they exist today, I wonder if we’ve managed to watch an entire industry evolve artificially and incorrectly.” (read more…)

CATEGORY: capital, profitability, VC

April 27, 2020 Tech Crunch : Indie.vc founder Bryce Roberts: Profitability is ‘more achievable than a Series A round’

“Genuinely, it’s not rocket science,” he says. “Profitability isn’t this crazy, elusive thing. It’s literally more achievable thana Series A round. It’s way more achievable than a Series B round. If you look at the kind of fall-off between those rounds, most entrepreneurs would be better off finding their path to profitability and scale.” (read more…)

CATEGORY: capital, profitability, VC

April 4, 2020 The Economist : Technology Startups are Headed for a Fall

On the surface, DoorDash stands to benefit from the pandemic, and Lime to suffer. In fact, the coronavirus may prove more indiscriminate than that. It strikes at a time when many of the world’s 450-odd unicorns were looking ropy. Their perpetually loss-making business models—only a small proportion are in the black—were increasingly being questioned. So were their exuberant valuations, which added up to perhaps $1.3trn globally. A reckoning was afoot; some unicorns would “go under”, Dara Khosrowshahi, boss of Uber, a ride-hailing giant which relinquished its unicorn status by going public last year, told The Economist on March 2nd. (read more…)

CATEGORY: downturn, profitability, resilience

March 1, 2020 Alex Lazarow via HBR : Beyond Silicon Valley

Start-ups operating amid conditions of relative scarcity, where capital and talent are hard to come by and economic shocks are more likely to occur, face unique pressures. Yet many have become superstars in their own right. Their formula involves a more balanced approach to growth, a focus on solutions to real problems, and investment in their workforce for the long term. These “frontier innovators” hold important lessons for companies of all sizes and in all locations—including Silicon Valley itself. (read more…)

CATEGORY: bootstrap, leadership, profitability