2019 Expansion SaaS Benchmarks Report

1O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved
2019
2019
EXPANSION SAAS
BENCHMARKS
View the interactive report at saasbenchmarks.com
WEBINAR

BACKGROUND

Our mission is to improve people’s
working lives.
We do this by:
• Investing in the best software
companies.
• Helping our portfolio companies
accelerate growth and become
market leaders.
Learn more at ov.vc
THE EXPANSION STAGE SOFTWARE VC

BENCHMARK STUDY OVERVIEW
639 enterprise software companies participated in the survey, including a
mix by company size (<$1M ARR to $50M+ ARR), software category
(infrastructure, application, etc.), and geography.
~70% of participants were CEOs, CFOs, or VPs of Finance at their
respective company.

US, 56%
Europe,
20%
Canada,
11%
APAC, 7%
Other, 6%
Less than
$1M,
26%
$1-2.5M,
14%
$2.5-10M,
27%
$10-20M,
13%
$20-50M,
11%
More than
$50M, 9%
DISTRIBUTION
BY GEOGRAPHY
DISTRIBUTION
BY ARR
Source: 2019 OpenView SaaS Metrics Survey, N=639.

EXECUTIVE SUMMARY:
KEY INSIGHTS FROM
THE 2019 STUDY

KEY SAAS PERFORMANCE METRICS
S I Z E A N D G R O W T H
Employees Number of full-time equivalent employees.
Funding Amount of equity capital raised to date.
YoY Growth Rate Change in annual recurring revenue.
F I N A N C I A L
Monthly Burn Rate (in 000’s) Net monthly burn rate basis (total $ lost each month, negative values = profit).
Sales & Marketing Spend Spending on Sales & Marketing, including headcount, as a % of year-end ARR.
R&D Spend Spending on R&D, including headcount, as a % of year-end ARR.
S A A S V A L U E D R I V E R S
CAC Payback (Months) Months of subscription gross margin to recover the fully loaded cost of acquiring a customer.
Logo Retention Annual logo retention seen in cohorts.
Net Dollar Retention Annual net dollar retention (after upsells & expansion) seen in cohorts.

8O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 8Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved
HEADCOUNT: DO YOU HAVE THE RIGHT
ORG TO SUPPORT GROWTH?
In the early stages, companies
have one employee for every
$100,000 in ARR. As companies
scale to $20M, that figure jumps
to $150,000. Best-in-class is
$200,000+.
On average, 31% of employees
are in Engineering and another
20% are in Sales. The next
largest functions are Customer
Success (15%) and Product
(11%).
Source: 2019 OpenView SaaS Metrics Survey, N=639
ARR Scale
0
100
200
300
400
500
600
700
800
Less than
$1M
$1-2.5M $2.5-10M $10-20M $20-50M More than
$50M
Median Third Quartile
Employee count (FTE)

FUNDING: LATER STAGE COMPANIES ARE
RAISING RECORD ROUNDS
Capital raised among companies
under $20M in ARR is nearly
unchanged from last year.
We have observed a spike in
capital raised among later stage
companies. The top quartile of
companies are raising $100M and
beyond to outpace their peers.
This coincides with the rise of VC
growth funds, PE firms going down
market, mega-rounds and record-
breaking fund sizes.
ARR Scale
Funds Raised ($M USD)
$0
$20
$40
$60
$80
$100
Less than
$1M
$1-2.5M $2.5-10M $10-20M $20-50M More than
$50M
Median Third Quartile 2018 Median

GROWTH: HOW FAST IS FAST ENOUGH?
SaaS companies grow rapidly in
the early stages – a typical
company doubles YoY and a top
quartile company nearly triples.
Revenue growth tends to decrease
as companies approach $10M in
ARR.
Growth rates are relatively
unchanged compared to 2018
despite increased fundraising and
burn levels (more on that later).
ARR Scale
Growth Rate (Annual)
0%
25%
50%
75%
100%
125%
150%
175%
Less than
$1M
$1-2.5M $2.5-10M $10-20M $20-50M More than
$50M
Median Third Quartile 2018 Median

Growth Rate (Annual)
50%
75%
100%
140%
Younger than 30 30 or older
GROWTH: IT HELPS TO HAVE A MORE
EXPERIENCED FOUNDING TEAM
Successful founders have often
tried, failed and themselves
experienced the pain points
they’re solving for customers.
For example, Eric Yuan founded
Zoom because during his time
leading Engineering at WebEx
he came to believe “the service
simply wasn’t very good” and
“someday, someone is going to
build something on the cloud,
and it’s going to kill me.”
Source: 2019 OpenView SaaS Metrics Survey, N=639 Founder age

BURN: STARTUPS ARE BURNING MORE TO
TRY TO BOOST GROWTH
Armed with record amounts of
cash, SaaS companies are
burning far more than last year.
For companies with $10-20M in
ARR, median burn is $375k per
month (up from $183k) and the
highest quartile is now burning
$625k per month.
Burn rates have increased the
most among companies with
$20-50M in ARR.
Source: 2019 OpenView SaaS Metrics Survey, N=639 ARR Scale
Monthly Cash Burn ($000’s)
$0
$50
$100
$150
$200
$250
$300
$350
$400
Less than
$1M
$1-2.5M $2.5-10M $10-20M $20-50M More than
$50M
2019 Median 2018 Median

SALES AND MARKETING: WATCH OUT
FOR INEFFICIENCIES PAST $10M ARR
Sales and marketing are a SaaS
company’s largest area of
spend after they hit $2.5M in
ARR (before that, it’s R&D).
Sales and marketing spend
peaks when companies are
scaling through Series C/D.
Watch out for inefficiency in
spend and a rising CAC
payback without corresponding
improvements in growth.
ARR Scale
Sales & Marketing Spend (% of ARR)
0%
10%
20%
30%
40%
50%
60%
70%
Less than
$1M
$1-2.5M $2.5-10M $10-20M $20-50M More than
$50M

LOGO RETENTION: FIX YOUR ‘LEAKY
BUCKET’ BEFORE POURING IN CASH
Top tier companies see logo
retention rates of at least 85%.
Be careful of accelerating your
sales and marketing spend if
you have a churn problem!
Median retention rates do differ
depending on deal size:
• <$1k: 71%
• $1-5k: 83%
• $5k-25k: 90%
• $25k-100k: 90%
• $100-250k: 93%
Logo Retention Rates (Annual)
11%
6%
21%
27%
35%
<65%
retention
65-74%
retention
75-84%
retention
85-94%
retention
>=95%
retention

NDR: GROW YOUR EXISTING
CUSTOMERS FIRST
The ability to expand new
customers facilitates rapid
growth. Top tier companies see
>100% net dollar retention.
For comparison, median net
dollar retention for public
companies was 107% (at the
time of S-1 filing).
85% 82%
86%
94% 96%
108%
<30% Growth 30-100% Growth >=100% Growth
Avg. Logo Retention Avg. NDR
Retention Rates (Annual)
Annual Growth Rate

SAAS METRICS BY COMPANY ARR
<$1M $1-2.5M $2.5-10M $10-20M $20-50M >$50M
Employees 8 (15) 25 (40) 47 (70) 100 (149) 180 (269) 555 (752)
Funding $3M ($3M) $3M ($9M) $8M ($15M) $28M ($43M) $63M ($88M) $88M ($100M)
YoY Growth Rate 80% (125%) 80% (165%) 50% (100%) 42% (78%) 40% (61%) 29% (40%)
F I N A N C I A L
Monthly Burn Rate ($ in 000s) $50 ($175) $50 ($175) $175 ($375) $375 ($625) $375 ($1,025) $50 ($1,063)
Sales & Marketing Spend 30% (50%) 30% (46%) 35% (50%) 40% (58%) 42% (55%) 38% (48%)
R&D Spend 50% (80%) 48% (60%) 30% (41%) 30% (39%) 30% (40%) 20% (30%)
CAC Payback (months) 5 (11) 8 (11) 11 (15) 15 (21) 15 (15) 15 (15)
Logo Retention 90% (100%) 90% (98%) 90% (95%) 88% (95%) 89% (95%) 88% (94%)
Net Dollar Retention 100% (106%) 100% (113%) 100% (110%) 95% (105%) 102% (110%) 98% (101%)
Source: 2019 OpenView SaaS Metrics Survey, N=639. Median (Third Quartile)

GO-TO-MARKET INSIGHTS

FOUNDERS ARE MOST WORRIED ABOUT
GTM AND PRODUCT EXECUTION
We learned that only two things
really matter at the end of the
day: product execution and
GTM execution.
These were founders’ top two
concerns regardless of
company size with just one
exception (hiring was the #1
priority for those with $1-2.5M in
ARR).
16%
19%
21% 22% 23%
26%
37%
50%
56%
C
hanging
needs
Hiring
velocity
C
om
petitive
pressure
Fundraising
Skills
m
ism
atch
C
ash
burn
Hiring
qualityG
TM
execution
Productexecution
Founder Concerns

WHO YOU TARGET SHOUD INFLUENCE
HOW YOU SELL
Inside sales is the most popular
sales channel in SaaS and is
used to reach customers of all
sizes, even very small
businesses.
Make sure sales channels are
supported by your average deal
size (do you make enough to
pay competitive sales
commissions?) and how your
customers prefer to buy.
Target Customer Segment
Sales Channel Mix (% of ARR)
27%
19%
7%
38%
40%
42%
32%
12%
16% 32%
47%
8%
16% 21% 16% 16%
VSB SMB Midmarket Enterprise
Self service/freemium Inside sales Field sales Indirect Mixed

YOUR TARGET CUSTOMER INFLUENCES
PRICING POWER, TOO
There’s a strong correlation
between target customer size,
sales channel and ACV.
Take a close look at your ACV
and target market and see
whether you’re on track to build
an enduring business (pro tip:
stop selling Enterprise deals for
<$25k).
Annual Contract Value (ACV)Source: 2019 OpenView SaaS Metrics Survey, N=639
31%
11%
45%
50%
20%
8%
12%
25%
47%
41%
7%
26%
40%
VSB
SMB
Midmarket
Enterprise
<$1k $1k-10k $10k-50k $50k-250k Other
Top Customer Segment

PRODUCT LED GROWTH
INSIGHTS

PRODUCT LED GROWTH IS YOUR SECRET WEAPON
Product Led Growth IPOs Since 2012

ADOPTION OF PRODUCT LED GROWTH
STRATEGIES
Most companies are
experimenting with PLG and
relatively few have gone ‘all in’
(33% of respondents).
Free trials remain the most
popular product led growth
strategy.
Freemium – while much
discussed – has only been
adopted by 18% of companies.
PLG
Companies
All
Companies
Free trial offering 74% 45%
Product analytics for decision making 67% 31%
Self-service buying experience 61% 28%
Bottoms-up sales 55% 31%
Product qualified leads 53% 29%
Referral programs 50% 31%
Dedicated growth FTEs 47% 27%
Freemium offering 38% 18%

PRODUCT LED GROWTH CAN BE USED TO
SELL INTO THE ENTERPRISE
Product led growth is especially
prevalent among companies
targeting very small business or
SMB customers.
Still, 1 in 4 companies targeting
large enterprises embraces PLG.
48% 42% 36%
25%
52% 58% 64%
75%
VSB SMB Midmarket Enterprise
PLG Non-PLG
Target Segment
% of Respondents
Source: 2019 OpenView SaaS Metrics Survey, N=639. PLG Companies
defined as those leveraging more than three of the 9 PLG strategies surveyed.

0%
20%
40%
60%
80%
100%
120%
Less than
$1M
$1-2.5M $2.5-10M $10-20M $20-50M More than
$50M
PLG Non-PLG
PRODUCT LED BUSINESSES GROW
FASTER AT SCALE
PLG companies grow slowly in the
very early days, as it takes time to
build a community of free users and
convert those users to paying
customers.
After $10M in ARR, the magic of
PLG kicks in as these companies
can scale faster. They aren’t as
limited by their ability to hire,
onboard and feed leads to
enterprise sales reps and they’ve
built up significant goodwill from
their users.
ARR ScaleSource: 2019 OpenView SaaS Metrics Survey, N=639. PLG Companies
defined as those leveraging more than three of the 9 PLG strategies surveyed.
Median Growth Rate

RECAP AND Q&A

SAAS METRICS BY COMPANY ARR
<$1M $1-2.5M $2.5-10M $10-20M $20-50M >$50M
Employees 8 (15) 25 (40) 47 (70) 100 (149) 180 (269) 555 (752)
Funding $3M ($3M) $3M ($9M) $8M ($15M) $28M ($43M) $63M ($88M) $88M ($100M)
YoY Growth Rate 80% (125%) 80% (165%) 50% (100%) 42% (78%) 40% (61%) 29% (40%)
F I N A N C I A L
Monthly Burn Rate ($ in 000s) $50 ($175) $50 ($175) $175 ($375) $375 ($625) $375 ($1,025) $50 ($1,063)
Sales & Marketing Spend 30% (50%) 30% (46%) 35% (50%) 40% (58%) 42% (55%) 38% (48%)
R&D Spend 50% (80%) 48% (60%) 30% (41%) 30% (39%) 30% (40%) 20% (30%)
CAC Payback (months) 5 (11) 8 (11) 11 (15) 15 (21) 15 (15) 15 (15)
Logo Retention 90% (100%) 90% (98%) 90% (95%) 88% (95%) 89% (95%) 88% (94%)
Net Dollar Retention 100% (106%) 100% (113%) 100% (110%) 95% (105%) 102% (110%) 98% (101%)
Source: 2019 OpenView SaaS Metrics Survey, N=639. Median (Third Quartile)

THANK YOU!

2019 Expansion SaaS Benchmarks Report

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