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

The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

SaaS solutions have the highest security features with 95% security failures due to human error

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

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

Negative Churn and Expansion Revenue

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

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

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

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

More SaaS & Tech 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”

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

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.

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

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

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

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.

36% of SaaS businesses managed to reduce their revenue churn over the last 12-months

Women in western countries use the internet 17 percent more than their male counterparts

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