Nerd Alert: Yeeeeeeeee! It’s my fav post of the year, and the most challenging part is choosing only 10 highlights, so I’m taking it to 11. My buddy David Skok and KeyBanc Technology Group are back again for their (12th) annual SaaS survey for Private Markets (download the PDF here). This report includes responses from senior executives at more than 350 companies, and we are seeing a rebound in growth as companies recover from the economic disruptions caused by COVID-19. Prior versions can be read here and here.
1. PRICING:
Only 41% of SaaS Companies priced by seat in 2021 (You may have seen my "occasional" posts on Consumption-Based pricing from time to time in this newsletter). Interestingly, 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:
New metric measured for this year - The median enterprise value of companies surveyed sits at 8.4x ARR (at the time of the liquidity event). But there is quite a bit of variation and a strong relationship between valuations and top-line growth.
3. SALES:
The primary mode of Sales and Marketing efforts remains Field Sales based in 2021 at 55% for companies with more than $5 ARR, with Inside Sales taking the second-largest chunk (29%). But the complimentary slide to this is the distribution of method by deal size. Anything greater than $250k is still Field Sales - but I'm getting no data yet on how many of those "field sales" are now remote/Zoom-led. Here is the expected sales cycle length based on ACV.
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: While the median sales and marketing spend maybe 36% of revenue, to really ramp ARR growth, you gotta blow a lot more, - the percentage of revenue in isn't much more than percentage growth spend out.
5. GROWTH:
Last year, 39% growth was expected in January. By the end of June, it was reduced to 20%, and in 2019 was 36%. Those 2019 growth levels are back up to a healthier 31% as the COVID disruptions start to settle, and forecasts are back to the same 36% seen in 2019.
6. CAC:
This one needs nuance, so the report has broken it into blended, new, and up-sell/expansion. The median blended CAC comes at $1.20 for every $1 of revenue realized, which sits slap bang in between 2019 ($1.10) and 2020 ($1.32). New Customer CAC is up against 2019 ($1.34) and 2020 ( $1.60) - SaaS is increasingly competitive. Upsell/cross-sell still sitting in cheap at $0.63 per $1 of ARR earned.
7. CAC PAYBACK:
CAC is also a measure of cash profitability per customer - and this negative trough is long! According to this survey, new customers, on average, take 2 years and 2 months to become profitable. This really highlights what will be a deepening dependency on Capital to fuel SaaS companies' growth.
8. ANNUAL DISCOUNT:
If like me, you are part of the great SaaS Ponzi Scheme, it may come as no surprise to you that annual contracts are discounted. But how much? 10% is median - and the range is tighter than I thought - 6%-14%.
9. CROSS SELL/UPSELL:
This is pretty much the same as last year: 36% of new ARR bookings are attributable to cross-sell/up-sell activities. Larger companies use this strategy more heavily than their smaller counterparts (2x more). This is likely due to not being so reliant on new acquisition focused as the business matures.
10. CHURN:
It's still a problem, folks. The report for this year recognizes a dollar churn decrease from 13.9% in 2020 (20% of which was attributed to Covid) back to 12.6%. This is back to similar levels from 2019 (12.5%).
11. BURN:
The average SaaS company burns $52m to get to $100m in ARR, and it takes under 9 years (8.7 to be exact).
