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

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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.

More SaaS + Software Stats

80% of venture capital investments take place in the enterprise

The statistic shows the worldwide IT spending on enterprise software from 2009 to 2020.

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

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

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

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

Negative Churn and Expansion Revenue

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

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

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

More Growth Strategy Stats

At a 35% CAGR, it takes 10 years for a SaaS company to grow from $5M to $100M in ARR

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

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

High-growth companies are 8X more likely to reach $1 billion in revenues than those growing less than 20%.

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%

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

Customer Segmentation analysis will help point out which are your most profitable segments

26% of SAAS companies with at least $15MM in GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher.

Median annual gross dollar churn was 8%, 7%, 6% and 8% in 2016, 2015, 2014 and 2013