For the seventh year in a row, we’re proud to work with KBCM Technology Group (formerly Pacific Crest Securities) to share results from a survey of ~424 private SaaS companies.
Thank you to the readers of forEntrepreneurs who participated in taking the survey! Thank you also to David Spitz (@dspitz) and the team at KBCM Technology Group for their work on the survey.
Part One will look at the following (The full report can be downloaded here):
- Survey Participant Composition
- Growth Rates
- Go-To-Market and Sales and Marketing
- CAC Rations and CAC Payback
- Operations
Representative statistics on the survey participants:
- $8.7MM median 2018 Ending ARR1, with 97 companies >$25MM
- Median organic growth in ARR in 2018 was +40% and +35% for companies >$25MM
- Median employees (FTEs): ~90
- Median customer count: ~300
- ~$28K median annual contract value
- 65% headquartered in the U.S.
Summary View of Median 2018 SaaS Metrics Performance
Respondents: Organic ARR Growth: 225, Sources of Gross New ARR Bookings: 214, Blended CAC: 197, 2018 In-Year Capital Consumption Ratio: 175, Cumulative Capital Consumption Ratio: 158, Gross Dollar Churn: 216
Survey Participant Composition
Survey Participant Geography (HQ)
Survey Participant Size Distribution
Human Capital Efficiency
Respondents (ARR per FTE Efficiency): 422, <$2.5MM: 99, $2.5MM-$5MM: 52, $5MM-$10MM: 71, $10MM-$25MM: 103, $25MM-$50MM: 46, $50MM-$100MM: 36, >$100MM: 15
Growth Rates
Organic ARR Growth
Note: Excludes growth from M&A
Respondents: Total: 324, <$2.5MM: 60, $2.5MM-$5MM: 39, $5MM-$10MM: 57, $10MM-$15MM: 36, $15MM-$25MM: 47, $25MM-$35MM: 17, $35MM-50MM: 23, $50MM-$75MM: 25, $75MM-$100MM: 8, >$100MM: 12
Organic ARR Growth Histogram
How Fast Did You Grow ARR Organically in 2018?
Note: Excludes companies with negative or no organic ARR growth
162 respondents
Growth vs. Burn Tradeoff
Note: Excludes companies with negative or no organic ARR growth
128 respondents
Median Growth As A Function Of Contract Size
Median Annual Contract Value (ACV): annual recurring SaaS revenues, excluding professional services, perpetual licenses and related maintenance for the median customer contract
Note: Median value may vary due to different sample population
Respondents/Median ARR: Total: 183, <$5K: 27/$14MM; $5K-$15K: 30/$13MM; $15K-$25K: 15/$18MM; $25K-$50K: 37/$16MM; $50K-$100K: 25/$19MM; $100K-$250K: 30/ $24MM; >$250K: 19/$33MM
Median Growth Rate As A Function Of Target Customer
1 Target Customer Focus – At least 2/3rds of revenue come from designated customer base
Note: Enterprise companies defined as primarily targeting customers with >1000 employees, Middle Market as 100-999 employees, SMB as 20-100 employees and VSB as <20 employees
Respondents: Total: 225, Enterprise: 78, Enterprise / Middle Market & Middle Market: 85, Middle Market / SMB & SMB: 34, SMB / VSB & VSB: 17, Mixed: 11
Reliance on Upsells & Expansions
1 Includes ~2.5% attributable to Price Increases
Respondents: Total: 214, $5MM-$10MM: 52, $10MM-$15MM: 35, $15MM-$25MM: 44. $25MM-$50MM: 39, $50MM-$100MM: 32, >$100MM: 12
Go-To-Market And Sales And Marketing
Primary Mode Of Distribution
1 Primary Mode of Distribution defined by determining the greatest contributor to new sales and confirming that it is at least a 20% point higher contributor than any other. If no mode satisfies these conditions, then it is Mixed
144 and 155 respondents, respectively
Median Growth Rate As A Function Of Sales Strategy
Respondents/Median ARR: Total: 141, Field Sales: 84/$22MM, Inside Sales: 40/$15MM, Mixed: 17/$24MM
Note: Internet Sales and Channel Sales excluded due to small sample size: Internet Sales: 3/$17MM, Channel Sales: 5/$12MM
Primary Mode Of Distribution As A Function Of Initial Median Contract Size
Respondents: Total: 251, <$1K: 7, $1K-$5K: 47, $5K-$15K: 42, $15K-$25K: 22, $25K-$50K: 48, $50K-$100K: 42, $100K-$250K: 28, >$250K: 15.
Analysis Of Field vs. Inside Sales In Key Crossover Deal Size Tiers
1 The % of dollar ARR under contract at the end of the prior year which was lost during the most recent year (excludes the benefits of upsells and expansions)
2 The % change in ACV from existing customers, resulting only from the effect of churn, upsells / expansions and price increases
3 Fully-loaded sales & marketing spend divided by new ARR components excluding churn
Respondents: Total: 44, Field-Dominated: 27, Inside-Dominated: 17
Sales & Marketing Spend vs. Growth Rate
S&M Composition: Sales vs. Marketing Cost
Respondents: Overall: 132, Field Sales: 78, Inside Sales: 38, Mixed: 16
Note: Internet Sales 3 and Channel Sales 5, excluded due to small sample size
S&M Composition: Sales vs. Marketing Cost Close-UP
2 Respondents above the 75th percentile
3 Respondents below the 25th percentile
Respondents: Overall: 132, Field Sales: 78, Inside Sales: 38, Mixed: 16
CAC Rations And CAC Paybacks
CAC Ratio Definitions
Note that we acknowledge some companies may believe it’s appropriate to assume a slight timing difference in their CAC Ratio analysis – S&M expenses determining future period ARR bookings, but for simplicity and consistency, we do not attempt to capture such assumptions here
Distribution Of 2018 CAC Ratios
Note: Based on 2018 CAC Ratios
1 See definitions on page 25
Respondents: Blended CAC: 197, New ARR from New Customer: 195, Upsells to Existing Customer: 152, Expansions: 137
CAC Payback Period (Gross Margin Basis)
Implied CAC Payback Period: Defined as # of months of subscription gross profit required to recover the fully-loaded cost of acquiring a customer; calculated by dividing CAC ratio by subscription gross margin
Respondents: New Customer CAC Payback: 162, Blended CAC Payback Period: 175
CAC And Capital Efficiency
2 Capital consumed defined as total primary cumulative equity raised plus debt drawn minus cash on the balance sheet (adjusted for dividends / distributions)
Note: Excludes companies with negative or no organic ARR growth
122 respondents
New Customer CAC Ratio By Primary Mode Of Distribution
Respondents: Total: 181, Field Sales: 102, Inside Sales: 57, Mixed: 22. Excludes Channel Sales: 6, Internet Sales: 8
Operations
Subscription Gross Margin
185 respondents
Note: Respondents asked to back out stock-based comp. expenses and include customer support expenses
SaaS Application Delivery Trends Since 2014
Reported “predominant” mode of delivery
Respondents: 2014: 297; 2015: 282; 2016: 289; 2017: 384; 2018: 245; 2019: 274; 3 Years from Now: 270
SaaS Application Delivery Mode As A Function Of Size Of Company
Respondents: Total: 192, $5M-$10M: 47, $10M-$15M: 32, $15M-$25M: 41, $25M-$40M: 20, $40M-$60M: 23, $60M-$100M: 19, >$100M: 10
Subscription Gross Margin As A Function Of Application Delivery
Respondents: Total: 252, Amazon Web Services (AWS): 148, Google Cloud: 18, Salesforce: 5, Microsoft Azure: 23, Other Third-Party: 8, Hybrid / Multi-Cloud: 10, Others: 9, Self Managed Servers: 31
Professional Services (%Of 1st Year ARR) As A Function Of Target Customer
Respondents: Total: 137, Enterprise: 52, Enterprise / Middle Market: 56, Middle Market / SMB: 22, SMB / VSB: 7, excludes Mixed: 4, due to small sample size and respondents indicating no professional services
Analysis Of Sales Commission Levels
Note: For the definition of Primary Mode of Distribution, please see page 17
Note: Lower bound is inclusive
Respondents: Total: 208, Field Sales: 126, Inside Sales: 82
Sales Commissions As A Function Of Median Initial Contract Size
Respondents: Total: 222, <$5K: 38, $5K-$15K: 37, $15K-$25K: 20, $25K-$50K: 49, $50K-$100K: 31, $100K-$250K: 27, >$250K: 20
Direct Commissions For Renewals, Upsells and Multi-Year Deals
