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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

As companies scale their growth engines, a slightly-above-average churn rate becomes harder and harder to offset with net new revenue growth, especially when the goal is to outpace it by 4x

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

Analysed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

Smaller SAAS companies reported more frequent use of third-party providers as their primary application delivery method, while the largest companies were more likely to use self-managed servers

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

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

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

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

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

More Growth Strategy Stats

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

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

Revenue Churn Rate = (RCR) (MRR at beginning of month – MRR at end of month) – MRR in upgrades during month / MRR at beginning of month

The largest SaaS companies (>$75million yearly revenue) attribute 2.5x as much new revenue to upselling than the smallest SaaS companies (<$1.25million): 28% versus 11%

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

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

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

47% of millennials want to work at diverse companies, according to a recent study.

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