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

From InsightSquared
Statistic in SaaS & Tech Growth Strategy

When we looked at the fastest growing SaaS companies in our study (those with a CAGR of over 50%) we found an average Quick Ratio of 3.9.

These SaaS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn. They are, in other words, exactly the type of SaaS startup that Mamoon looks for when deciding where to invest.

And, as their high Quick Ratio implies, they have a great chance to continue growing quickly and healthfully, and eventually become one of those fabled SaaS companies with a run rate of more than $10 million.

However, once we started digging deeper, the story became a little more complicated (and more interesting).

More SaaS + Software Stats

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

The largest SaaS companies (>$75million yearly revenue) attribute 2.5x as much new revenue to upselling than the smallest SaaS companies (<$1.25million): 28% versus 11%

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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

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

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

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After $10M in ARR, the median growth rate slows to just under 50%

More SaaS & Tech Growth Strategy Stats

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

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%”

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Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added

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

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

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In contrast to these, the median annual churn rate for smaller, private SaaS companies with less than $10M in revenue is 20%

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