All types of investment have grown, year-on-year, with the biggest growth during the seed stage of financing

SaaS + Software
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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

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

How Often Should The Pricing Committee Be Meeting And Making Changes?

Internet Sales strategies have a significantly lower CAC of just $0.42

The average company gets 16% of new ACV sales from up-sells and expansions, though companies with revenue between $10MM-$40MM are relying more heavily on up-sell and expansions

SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

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

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

The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel

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%”

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

More Growth Strategy Stats

Japanese company Hitachi accounted for three percent of the world’s market for diagnostic imaging in 2017.

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

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

At Facebook, 15 percent of tech roles are staffed by women

As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn

The median SaaS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts

In 2018, the global tech spending is forecast to amount to 3,212 billion U.S. dollars.

The average SaaS company spends just 6 hours determining their pricing strategy

The median cost for a SaaS company to acquire a dollar of new customer revenue is $1.18

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