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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

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

The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost

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?

If a software company grows at 20% annually, it has a 92% chance of ceasing to exist within a few years

The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year

Software and online services are in a period of dizzying growth

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; which may have a dramatically negative effect on your company’s growth. Source: Mckinsey

SaaS companies in the $7.5MM-$15MM range are among the fastest growers

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

More Growth Strategy Stats

Increases in revenue growth rates drive twice as much market-capitalisation gain as margin improvements for companies with less than $4 billion in revenues

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

In 2017, the global adoption rate for biotech soybean amounted to 77 percent.

Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less

Is your SaaS business viable?

Achieving a SaaS Quick Ratio of 4 is a good benchmark for young, high-growth companies but the equation changes as those companies reach scale

Google only has a 30 percent female workforce

More than 1/2 of SAAS companies increased their spending on customer retention last year

55% of SaaS companies rate Customer Retention as the key metric to measure

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