Quote Info

Year-old companies are turning down billion-dollar buyouts in the hopes of multibillions in a few months. But we have seen similar industry phases before, and they have often ended with growth and valuations fizzling out. The industry’s booms and busts make growth, an essential ingredient in value creation, difficult to understand. To date, little empirical work has been done on the importance of revenue growth for software and Internet-services companies or how to find new sources of growth when old ones run out.

Mckinsey

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

SaaS IPOs have more than doubled over the last 12 years

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

The average Quick Ratio of fastest growing SaaS companies (those with a CAGR of over 50%) is 3.9: generating $3.9 in revenue for every $1 lost to revenue churn

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

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

The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%

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

SAAS companies need to track the number of visitors, trials and closed deals; And also track the conversion rates, with the goal of improving those over time

80% of venture capital investments take place in the enterprise

More Growth Strategy Stats

SaaS IPOs have more than doubled over the last 12 years

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

How to Reduce Churn

As of December 2018, there were total 105,000 employees in Lockheed Martin, as compared to 126,000 employees in 2015.

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

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

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

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

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%”

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate