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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

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

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

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

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

Publicly-traded SaaS companies have an average Revenue Per Employee of $200,000

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%”

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

The average Quick Ratio of fastest growing SaaS companies (those with a CAGR of over 50%) is 3.9: generating $3.9 in revenue for every $1 lost to revenue churn

In contrast to these, the median annual churn rate for smaller, private SaaS companies with less than $10M in revenue is 20%

Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales

More Growth Strategy Stats

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

While field sales remains the most popular way to sell for companies >$2.5MM revenue, companies with <$2.5MM revenue tended to use inside sales as their primary mode of distribution

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

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

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

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

Unlike many other industries, if a software company grows at only 20%, it has a 92% chance of ceasing to exist within a few years

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

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.

Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added