Software and online services are in a period of dizzying growth

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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.

More SaaS + Software Stats

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

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

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

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

Increases in revenue growth rates drive twice as much market-capitalisation gain as margin improvements for companies with less than $4 billion in revenues

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

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

The median SaaS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month

80% of venture capital investments take place in the enterprise

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

More Growth Strategy Stats

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

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

It’s essential to have a point of view that puts a stake in the ground and breaks through the clutter.

The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year

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

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

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.

A 1% increase in pricing strategy yields an average 11% increase in profit

SaaS IPOs have more than doubled over the last 12 years

Sony’s PlayStation brand had accumulated approximately 38.57 million fans on the social network