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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 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

To generate a single dollar of new customer revenue, Field Sales strategies have an average Customer Acquisition Cost (CAC) of $1.14

The very best SAAS business has a negative churn rate and will have a Dollar Retention Rate of greater than 100%

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

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

When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”

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

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

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

86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available

More Growth Strategy Stats

When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”

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

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

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

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

26% of SAAS companies with at least $15MM in 2015 GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher

How to Reduce Churn

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

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

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