# Top 10 in Tech - What to know for Week ending September 25, 2020

Published: 24 September 2020
Canonical: https://www.top10in.tech/posts/week-ending-september-25-2020

[David Skok](https://www.linkedin.com/in/dskok/) is a legend in the SaaS world and I have [written](https://medium.com/north-america-tech-for-kiwis/2018-sdr-metrics-report-from-the-bridge-group-f7fee0ad46df) about his work [a little](https://medium.com/north-america-tech-for-kiwis/new-saas-report-from-the-bridge-group-680c2b7cd3d6) in the past, as well as [convincing him to speak](https://vimeo.com/269662500) at an event - gifting South African born Skok with an All Blacks rugby top was an outstanding idea.

The annual [KBCM Technology Group](https://www.key.com/businesses-institutions/industry-expertise/technology.jsp) SasS report which Skok is an endorsement partner for 2020 is now out and is a special COVID Edition. I’m dedicating this weeks newsletter to 10 top nuggets from this report as it’s the industry go-to benchmarking report. The full report can be [downloaded as a nice PDF here](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/08/2020-KBCM-SaaS-Survey.pdf) (It’s also the ten year anniversary of the survey). There are way more nuggets in here than the ones below. So be sure to take a deeper read.

## 1. GROWTH 1

Ouch! There is still growth, but the [top line growth projections for 2020 have been pretty-much cut in half](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide3-1-1.png). 39% growth was expected as of January, by the end of June [it was reduced to 20%](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide9.png) (2019 was 36%).

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide3-1-1.png

## 2. GROWTH 2

These two charts may show a better visual of what the above means. 2019 was a [typical year in growth for SaaS](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide6.png) and 2020 [looked the same](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide7.png) (at least in January) until COVID forced a [massive change in 2020 revenue forecasts](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide8.png) (green is more, red is less) with the end of June re-forecasts.

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide6.png

## 3. GROWTH 3

If you don’t know by now, Silicon Valley has a bit of an obsession with SaaS growth. The [40% rule](https://twitter.com/PointNineCap/status/1108374783262158849) (nice little video explainer for ya) is an examples of that. TL;DW when a VC backed SaaS businesses adds profit + growth rate, the total should be equal to 40% or ideally more. This helps calculate the cadence of a business: [The faster they grow, the less profitable they need to be](https://feld.com/archives/2015/02/rule-40-healthy-saas-company.html). [Here is Skok’s 40% rule chart of the companies surveyed](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide44.png). It’s a high bar with just a couple of dozen of the 200 respondents hitting or surpassing that line.

Link: https://twitter.com/PointNineCap/status/1108374783262158849

## 4. CHURN

Anecdotally in 2020 I have churned or reduced plans both professionally and personally with quite a few SaaS products in my desire for more work-life austerity. So how does my sentiment resonate across larger industry trends of churn? Covid Churn is definitely a thing and the report recognizes [a YoY trend of a dollar churn increase from 12.5% in 2019 to 13.9% in 2020, 20% of which was attributed to Covid.](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide11.png)

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide11.png

## 5. CAC

Also increased across the board for 2020 (covering new, up-sell/cross-sell and blended CAC). [Every dollar of new revenue in 2020 costs $1.60](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide13.png) (compared to $1.35 in 2019). Up-sell and cross-sell still remains the CAC bargain, but it’s still up YoY, with each dollar of new revenue costing $0.69 in 2020 (it was $0.61 in 2019). Big impacts to sales efficiency.

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide13.png

## 6. CAC PAYBACK

Increasing CAC also [stretches out the 2020 customer CAC payback period](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide14.png), from 1.9 years average in 2019 (which is a crazy big number IMO) to an even larger 2.4 years in 2020 for new customers. This means it will take a 2020 SaaS company 2.4 years to reach cash profitability per customer - that is an expansive trough! Up-sell and cross-sell remains much closer but still significantly up - 8 months in 2019 to 1 year in 2020. This really highlights what will be a deepening dependency on Capital to fuel SaaS companies growth.

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide14.png

## 7. FUNDING

Adding on to my last sentence above, [only 14% of companies surveyed were Bootstrapped or Independent](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide29.png). A cool slide this year is [breaking down performance based on funding type](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide30.png). VC-backed business demonstrate better growth, but at the total expense of margin, which is very much negative in comparison to their bootstrapped peers which YoY remained profitable (but with a significantly smaller average deal size). [Correlating these deal size categories to forecast growth](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide21.png) highlights that the low end of town retained the best re-forecast for 2020 (25% growth)

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide29.png

## 8. SALES

The primary mode of Sales and Marketing efforts [remains Field Sales based](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide27.png) in 2020, but has shrunk from 54% last year, with Inside Sales taking a growing chunk of the remainder. (28% last year to 33% this year). Sales forecasting took a big hit too with over [half (52%) of companies forecasting a reduction in revenue forecasts for the remainder of the year](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide34.png).

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide27.png

## 9. DEAL SIZE

For the most part [this is pretty evenly split between 3 categories: Sub $15k (32%), $15-$50k (30%) and $50k-$250k (29%](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide20.png)). Over $250k deal size remains the exclusive group with just 9% of surveyed respondents.

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/Slide20.png

## 10. DELIVERY

This is a great trend but lifted taken from the 2019 report (as it wasn’t reported this year), it's one of my favorite slides. How is a SaaS product shipped? [88% today use third-party cloud](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2019/10/img_5d9cb4f575998-e1570551047347.png) (up from just over 60% 4 years ago). AWS remains solidly dominant at 60% but with drop from last year as Azure and GCP have seen gains and Hybrid-Multi-Cloud will be an emerging option as competitive pressures mount. AWS also [dominates across companies of every scale](https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2019/10/img_5d9cb54a6b587-e1570551133190.png) but self managed infrastructure is more common at the high end of town.

Link: https://dskok-wpengine.netdna-ssl.com/wp-content/uploads/2019/10/img_5d9cb4f575998-e1570551047347.png

## POD OF THE WEEK

Of course it’s from our good buddy David Skok, [choosing the right metrics for the right growth stage](https://blog.chartmogul.com/david-skok-on-choosing-the-right-metrics-for-the-right-growth-stage).

Link: https://blog.chartmogul.com/david-skok-on-choosing-the-right-metrics-for-the-right-growth-stage