SaaS IPOs have more than doubled over the last 12 years

SaaS + Software
Quote in SaaS & Tech Growth Strategy

Quote Info

  1. The number of SaaS IPOs has more than doubled in the past 12 years. t
  2. The number of rounds of financing each company raises before IPO has nearly doubled from 2.5 to 4.5, i.e. Series B/C to Series D/E. These figures exclude seeds, which I’ve defined as rounds less than $1.5M.
  3. The total amount of cash raised before IPO has doubled from the ’98 cohort, adjusted for inflation.
  4. The median round sizes across the life of the company have remained relatively constant.
  5. IPO offerings have increased by about 40% in size
Tomasz Tonguz

More SaaS + Software Stats

SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

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

86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

Is your SaaS business viable?

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

Publicly-traded SaaS companies have an average Revenue Per Employee of $200,000

Software and online services are in a period of dizzying growth

More SaaS & Tech Growth Strategy Stats

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

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

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

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

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)

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

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.

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

The boom in the industry is creating more jobs for techies. Data reveals there were 627,000 unfilled positions in tech in April 2017

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

Looking for SaaS focused services?
SaaS Website Design
SaaS SEO Agency
SaaS PPC