# Top 10 in Tech - What to know for Week ending November 18, 2022

Published: 17 November 2022
Canonical: https://www.top10in.tech/posts/week-ending-november-18-2022

SaaS Nerd Alert: Yeeeeeeeee! It's my fav post of the year, and the most challenging part is choosing only 10 highlights, so, as usual, I'm [taking it to 11](https://media.giphy.com/media/aqSl7Dw5HTojK/giphy.gif). KeyBanc Capital Markets (KBCM) are back again for their (13th) annual SaaS survey for Private Markets ([download the PDF here](https://www.key.com/kco/images/2022_kbcm_saas_survey_10-20-22_vf.pdf)). This report includes responses from senior executives across SaaS companies at various stages, and we are seeing a rebound in growth as companies recover from the economic disruptions caused by COVID-19. Why should you care? This is data from Private Companies - of which about 20% are less than $5M in ARR, and about 40% are less than $10M - sound like you?

**WORD OF CAUTION**: The number of respondents has dropped significantly this year: 110 vs. [354 last year](https://www.key.com/kco/images/2021_kbcm_saas_survey_final.pdf) and [424](https://www.key.com/kco/images/2019_KBCM_saas_survey_102319.pdf) in 2019 (the 2020 count is confusing as they had to run it twice - a COVID thing).

1. PRICING:

Only [41% of SaaS Companies priced by seat](https://www.dropbox.com/s/k3gmsx6muvllebq/1%20-%20PRICING.png?dl=0). (You may have seen my "occasional" posts on [Consumption-Based pricing](https://www.top10in.tech/top-10-in-tech/archives/10-2021) from time to time in this newsletter). An interesting note is that this survey now includes varying segments beyond B2B and B2C - such as B2D (D for Developers) and API companies. Which reflects the evolving tech/SaaS landscape.

2. VALUATIONS:

This is a new metric measured starting from last year - The median enterprise value of companies surveyed last year [was 8.4x ARR](https://www.forentrepreneurs.com/wp-content/uploads/2021/10/Slide63.png) (at the time of the liquidity event), which had quite a bit of variation and a strong relationship between valuations and top-line growth. This year, shockingly to no one, [valuations are down to 6.1x ARR](https://www.dropbox.com/s/uvph4tw9w30octs/2%20-%20VALUATION.png?dl=0) (based on their most recent round).

3. SALES:

The [primary mode of Sales efforts remains Field Sales based](https://www.dropbox.com/s/torvntkjpbxm2xo/3%20-%20SALES.png?dl=0). 59% for companies with more than $5 ARR and 73% for companies under $5m ARR. Inside Sales took the second largest chunk (22% and 14% respectively). But the complimentary slide to this is the distribution of method by deal size anything greater than $250k is all "Field Sales" - but assume a lot here is now Zoom-led.

4. MARKETING SPEND:

Figuring out how to optimize marketing spend and growth rate is a crucial question, and this study doesn't show the benchmarks marketers want to hear: Results vary. While the median sales and marketing spend has [dropped this year to 31%](https://www.dropbox.com/s/mivd1ak1ygwxvko/4%20-%20SM%20spend-vs-growth.png?dl=0) of revenue (down [from 36%](https://www.forentrepreneurs.com/wp-content/uploads/2021/10/Slide34.png)), to ramp up ARR growth, you gotta blow a lot more dough relative to revenue: the percentage of revenue in isn't much more than percentage growth spend out.

5. GROWTH:

The 2021 growth levels were back up to a healthier 31% as the COVID disruptions settled (2020 was 20%!). This year is an [ARR growth of 31%](https://www.dropbox.com/s/qclcq3tynph5caz/5%20%20-%20GROWTH.png?dl=0), and forecasts are always a few points more optimistic - still at [the same 36%](https://www.dropbox.com/s/tmotypr44wnm6x5/5%20%20-%20GROWTH%202.png?dl=0) seen in 2021 and 2019. BONUS - you can see how that 31% is split by industry categories [here](https://www.dropbox.com/s/sw5z6hq8x17c6j7/5%20%20-%20GROWTH%20by%20CATEGORY.png?dl=0).

6. CAC:

This one is always nuanced. The report always breaks CAC down into blended, new, and up-sell/expansion so you can see the efficacy of spend to return. The median blended CAC comes in exactly the same as last year - [$1.20 for every $1 of revenue realized](https://www.dropbox.com/s/m6wgpb20bo5r0ek/6%20%20-%20CAC.png?dl=0). FYI it was [$1.10 in 2019 and ($1.32) in 2020](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide13.png). New Customer CAC is up significantly YoY and at $1.78: 2021 ($1.67), 2020 ( $1.60), and 2019 ($1.34). This signals two things: 1. SaaS is increasingly competitive, and 2. CAC Payback is getting way longer. Upsell/cross-sell (see below) is still cheap at $0.61 per $1 of ARR earned (and down from $0.63 last year).

7. CAC PAYBACK:

CAC is also a measure of cash profitability per customer - and this negative trough is long, so take a seat! New customers, on **average**, [take 2 years and 2 months](https://www.dropbox.com/s/z3tedek2i7ejen8/7%20%20-%20CAC%20PAYBACK.png?dl=0) to become profitable. This highlights a deepening dependency on access to capital to fund a SaaS company's growth through these [SaaS Cash Flow troughs](https://www.forentrepreneurs.com/saas-economics-1/).

8. DISCOUNTS:

If you are [part of the great SaaS Ponzi Scheme](https://twitter.com/top10intech/status/1460448403326844933?s=20) like me, it may be no surprise that annual+ contracts are discounted. But how much? [8% is the median annually](https://www.dropbox.com/s/o6mqd8831i29fjm/8%20-%20DISCOUNTS.png?dl=0), and 10% on multi-year.

9. CROSS SELL/UPSELL:

This one is interesting as it is way higher than the [36%](https://www.forentrepreneurs.com/wp-content/uploads/2021/10/Slide16.png) last year: [46% of new ARR bookings are attributable to cross-sell/up-sell activities](https://www.dropbox.com/s/uzvx5dzjp2i23io/9%20%20-%20CROSS%20SELL%20UPSELL.png?dl=0). Larger companies use this strategy more heavily than their smaller counterparts (2x more). This is likely due to not relying so heavily on acquisition as the business matures.

10. CHURN:

Yeah - this one is a big problem, folks. The report for last year recognizes a YoY trend of a dollar churn decrease [back to 12.6%](https://www.forentrepreneurs.com/wp-content/uploads/2021/10/Slide23.png) (same as 2020). Which is also similar to 2019 levels (12.5%). [This year: 14%](https://www.dropbox.com/s/24ulxkmo3xpo5sa/10%20%20-%20CHURN.png?dl=0). Luckily cross-sell upsell offsets this somewhat. Note that NDR is in the middle - [109%](https://www.dropbox.com/s/uqtfm2hu38umz91/10%20%20-%20NDR.png?dl=0).

11. ARR per FTE:

Capital Efficiency is a new metric we all want to track in these LeanOps times. This number is [$143K per FTE](https://www.dropbox.com/s/8vbvyrv32e6uxlu/11%20-%20ARR%20per%20FTE.png?dl=0). With public companies, it's double that, according to [data from Maritech](https://www.meritechcapital.com/benchmarking/comps-table).