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

From Tomasz Tonguz
Quote in SaaS & Tech Growth Strategy

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.

More SaaS + Software Stats

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

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

How To Make Pricing A Constant Process In Your Organization

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

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

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

When venture capitalists participate in seed rounds, the average round size is 3x larger

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

Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover your cash problem

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

More SaaS & Tech Growth Strategy Stats

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

When venture capitalists participate in seed rounds, the average round size is 3x larger

After $10M in ARR, the median growth rate slows to just under 50%

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

SAAS companies need to track the number of visitors, trials and closed deals; And also track the conversion rates, with the goal of improving those over time

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

Google only has a 30 percent female workforce