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In other words, the typical round size for SaaS companies hasn’t changed materially over the past 16 years but the number of rounds has doubled, which has doubled the amount of capital a startup raises in aggregate before IPO. At least on the surface, the data indicates SaaS companies aren’t more efficient.

That pattern may be driven by an increasingly friendly financing environment or because of increased capital needs of the business or many other reasons. So the next question to answer is capital efficiency. In a future analysis, I’ll calculate the ratio of revenue dollars to VC dollars invested to get a sense of the reality of cloud capital efficiency per revenue dollar.

Tomasz Tonguz

More SaaS + Software Stats

Moving from $1.5 million with an eye towards $10 million in ARR is a tough a task and will take an excellent VP of sales to get you there

The best SAAS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate

The fastest growing SaaS companies raise an average of $9.5M in Series A funding

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%

In 2017, IBM generated 37.8 billion U.S. dollars in global IT services revenue, making it the largest IT services company in the world in terms of net sales

Revenue per employee has been steadily increasing in SAAS companies. It serves as a great longitudinal measuring stick to understand the increasing or decreasing efficiency of the business

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

When venture capitalists participate in seed rounds, the average round size is 3x larger

More Growth Strategy Stats

General Dynamics is a market leader in the aerospace and defense industry. In 2018, a total of 105,600 people were working at General Dynamics.

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

At Twitter, 10 percent of tech roles are staffed by women

In 2017, the world invested around 3.4 billion U.S. dollars in small hydropower technologies, down from 3.9 billion U.S. dollars in 2016.

The venture-backed companies that were acquired most often had a 7 percent share of female execs, as opposed to 3 percent at unsuccessful (unacquired) firms

The best SaaS companies achieve 5-7% annual revenue churn – equivalent to a loss of $1 out of every $200 each month

The median SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

Invention is 10% inspiration and 90% perspiration.

If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer