Presentation given by Blake Bartlett from OpenView Venture Partners. What’s the first metric VCs hunt for in your pitch deck? Easy… committed monthly recurring revenue (CMRR). Everyone knows that, right? In their famous report on the laws of cloud computing, Bessemer Venture Partners rightly says, “[CMRR] is the single most important metric for a Cloud business to monitor, as the change in CMRR provides the clearest visibility into the health of any Cloud business.” Ask any cloud / SaaS investor, and they’ll say the same thing. This is the foundational metric that everyone scours the pitch deck to find. But is CMRR growth everything? Let’s compare two companies with nearly identical CMRR growth curves. We’ll call them Company ABC and Company XYZ. The chart below shows that indeed, both companies are on the same CMRR trajectory. Read more at http://blog.openviewpartners.com

1. Blake Bartlett
OpenView Venture Partners
@blakebartlett
Why the Most Important
Success Metric in SaaS
Is Misleading
Featuring the stars of the new Vince Vaughn movie –
Unfinished Business (and other celebrities)

3. What’s the first metric VCs hunt for in
your pitch deck?
That’s easy..

4. Committed Monthly Recurring Revenue

5. “[CMRR] is the single most important
metric for a Cloud business to monitor,
as the change in CMRR provides the
clearest visibility into the health of any
Cloud business.”
Bessemer Venture Partners
Laws of Cloud Computing

6. Ask anyone.

7. This is the foundational metric that
everyone scours the pitch deck to find.
But is CMRR growth everything?

9. Two Companies / Same CMRR Trajectory
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Total CMRR Over Time
Company ABC Company XYZ
Which company is more interesting?

10. It’s not a trick question.

11. How does a VC decide which of these
two companies to invest in?

12. Contrary to popular opinion, it is (a
little) more scientific than a blindfolded
dart-throwing contest.

13. First things first…let’s look at the next
level of detail beneath total CMRR
growth trajectory

14. Gross New CMRR Added per Month
Since each month can be viewed as a new customer cohort (upsells are excluded),
this tells you the size of each new cohort you’re adding (in $). This is basically your
new customer sales.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
New Customer CMRR Per Month
Company ABC Company XYZ

15. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
New Customer CMRR Per Month
Company ABC Company XYZ
Now which company is interesting?
Clearly, ABC.

16. I MEAN…
THAT GROWTH
THO!

17. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
New Customer CMRR Per Month
Company ABC Company XYZ
ABC has grown the new cohort size (aka sales) by 2.4x in 2 years. ABC
clearly knows how to scale! XYZ is so boring. They’ve been adding $10K
of new CMRR every month for two years. WOMP WOMP. No thanks XYZ.

18. THAT
GROWTH
THOUGH!Wait one second…

19. Aren’t these two charts both examining
the same two companies?
Identical on one chart 
Completely different on other 

20. Huh?

21. Solving for end-of-month CMRR (1st
Chart) is pretty simple arithmetic.
End-of-Month CMRR =
Beginning-of-month CMRR + New Customer
CMRR + Upsell CMRR - Downgrade CMRR -
Churned CMRR.

22. Let’s look at the inputs:
1. Beginning-of-month CMRR: more of an input than a
variable here, ignore
2. New Customer CMRR: we know this from Chart 2.
Again, XYZ is growing and ABC is flat
3. Upsell CMRR
4. Downgrade CMRR
5. Churned CMRR
These are all sub-elements of retention

23. We can
conclude…Company
ABC has a churn issue.

24. What’s the best way to measure churn and
benchmark against other SaaS
companies?
Net dollar retention.
If I acquire $1 of CMRR today, what is that
$1 worth over time?

25. I’ve seen a lot of companies recently
with strong CMRR growth
But weak net dollar retention – with $1
of CMRR shrinking to 40-50¢ within 12
months

26. People call this a leaky
bucket

27. But…
The best companies are seeing that $1
grow (not shrink) over time.
Welcome to net negative churn.

28. I know I’m not the Christopher Columbus
of negative churn.

29. But it’s important

30. It can be easy to
ignore a leaky bucket
early on

31. These guys are good
They’re growing!
Go-to-market is scaling!

32. But in comparison

33. This equation measures CMRR in Month X as a % of CMRR in Month 1
0%
20%
40%
60%
80%
100%
120%
140%
CMRR in Month X as a % of CMRR in Month 1
Company ABC Company XYZ
Let’s look at the net dollar retention curves of Company ABC
and XYZ to understand what’s going on…

34. Wow. This is dramatic.

35. And the rose-colored glasses
come off

36. Let’s assume XYZ is able to scale its go-to-market like ABC.
Which will give us a true apples-to-apples comparison
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
New Customer MRR Per Month
Company ABC Company XYZ

37. +

38. =

39. $0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
Total CMRR Over Time
Company XYZ

40. Compared to ABC…

41. $0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
Total CMRR Over Time
Company ABC Company XYZ

42. XYZ pulls away from ABC.
XYZ is now ~58% bigger than ABC.
All thanks to superior net dollar retention.

43. Which makes VCs
say…

44. Let’s invest in XYZ!

45. What you need to remember
1. Improving net dollar retention gives you much
more leverage on the go-to-market front.
2. The 1-2 punch of accelerating customer
acquisition and healthy retention is the magic
formula for exponential growth and lots of VC
love.

46. Blake Bartlett
OpenView Venture Partners
@blakebartlett
You can find more content on
expansion-stage growth at
www.openviewpartners.com
Thanks!