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In the first 3 years, these public SaaS companies spend between 80 to 120% of their revenue in sales and marketing (using venture dollars or other forms of capital to finance the business). By year 5, that ratio has fallen to about 50% where it remains for the life of the business.

Despite the divergent revenue ramps, the marketing and sales spend patterns for these companies resemble each other strongly and serve as good benchmarks for high-growth SaaS startups.

In case you’re curious, below is the “typical” revenue growth trajectory for these SaaS companies: $50M in year five, $100M in year ten.

Tomasz Tonguz

More SaaS + Software Stats

At a 35% CAGR, it takes 10 years for a SaaS company to grow from $5M to $100M in ARR

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

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

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

55% of SaaS companies rate Customer Retention as the key metric to measure

Median annual gross dollar churn was 8%, 7%, 6% and 8% in 2016, 2015, 2014 and 2013

SAAS companies with >$250K median ACV book nearly 25% of their contracts at 3 years or longer

80% of venture capital investments take place in the enterprise

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

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

More Growth Strategy Stats

Internet sales strategies are the only sales method to see a decline in CAC, dropping from $0.54 to $0.42 between 2014 and 2015

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%”

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

The best SaaS companies achieve 5-7% annual revenue churn – equivalent to a loss of $1 out of every $200 each month

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

56% treat “Existing Customer Renewals” as high priority

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

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

Revenue Renewal Rate= (MRR up for the renewal at beginning of month- MRR not renewed at the end of month)/ MRR up for renewal at beginning of month)

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue