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.
More SaaS + Software Stats
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
More Growth Strategy Stats
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.