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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

While field sales remains the most popular way to sell for companies >$2.5MM revenue, companies with <$2.5MM revenue tended to use inside sales as their primary mode of distribution

High-growth companies are 8X more likely to reach $1 billion in revenues than those growing less than 20%.

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

The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%

In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal

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

Software and online services are in a period of dizzying growth

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; this will become a major drag on growth

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

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

More Growth Strategy Stats

In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal

Account Churn Rate (ACR) = customers at beginning of month – customers at the end of month / customers at beginning of month

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

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

High-growth companies offer a return to shareholders 5 times greater than medium-growth companies

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

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

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

Analyzed 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

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