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In other words, software companies must grow quickly to survive. Slow growing businesses suffer from the lack of oxygen that fuels growth. Raising money is more expensive. Hiring becomes challenging. Without the capacity to invest capital in growth or the ability to compete for top talent, the slow growth cycle reinforces itself.

The McKinsey study breaks down rapid growth into two parts. In part one, the authors identify five key factors of success in the early stages. Large market; logical revenue model; rapid-adoption; stealth/secrecy; proper compensation of the leadership team.

This list will surprise no one, except perhaps for stealth. Is secrecy and stealth a prerequisite to success for every massive software company? For most bottoms-up businesses, stealth isn’t a competitive advantage, but awareness is.

Part two is more interesting. The defining characteristic of enduring software businesses is they “master the transition from one act to the next.” Fast-growth startups must metamorphose constantly because the market demands it of them.

Tomasz Tonguz

More SaaS + Software Stats

The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year

Growing faster has twice as much impact on share price as improving margins

Companies with longer contracts (2+ years) reported the lowest annual unit churn

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 2015 median revenue growth rate was 44%, while the median projected growth rate for 2016 is 48%

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

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

54% treat upselling and add-on sales as high priority

The best place to hide a dead body is page 2 of Google search results.

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

More Growth Strategy Stats

Only 8% of large companies use internet sales strategies. The proportion of companies relying on internet sales increases as company size decreases

In 2017, the world invested around 3.4 billion U.S. dollars in small hydropower technologies, down from 3.9 billion U.S. dollars in 2016.

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

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”

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

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

Negative Churn and Expansion Revenue

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%

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

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