State of SaaS - SaaSFest 2016

The State of SaaS
SaaSFest 2016
#SAASFEST16 Brought to you by your friends at@PriceIntel

Today is all about change.

Today is all about change,
and how you’re going to evolve.

SaaS 1.0

SaaS 1.0:
Function, Connection, and Infrastructure

SaaS 2.0

SaaS 2.0:
Customer, Market, and Product

Who in the world are you?

ProﬁtWell
SaaS pricing software
and tech enabled
services
Free ﬁnancial metrics
for subscription
businesses
Price
Intelligently
Happy customers big and small

We’ve seen inside more software
companies than anyone else on the
planet.

We live in a world where
acquisition, as we know it,
is dead.

The market is saturated, and
unit economics just aren’t
what they used to be…

Competition is now rampant.

Q: How many competitors did you have in your first year of business?
A: Companies started more than a year ago had far fewer
competitors in their space than companies started today.
N = 1432 software founders and executives
Average#ofCompetitorsintheirfirst
yearofbusiness
0
3
5
8
10
5 years old 3 years old 1 year old
9.7
4.8
2.6

Q: How many competitors do you have now?
A: Older companies increased competition over time, likely due
to attracting new entrants, as well as decreased barrier to entry
CurrentAverageNumberofCompetitors
0
3
7
10
13
5 years old 3 years old 1 year old
10.25
11.7512.15

The relative value of features is declining.
All software is going to $0.

N = Varies by line, but minimum of 10,000 customer respondents per line
WTPas%ofWTP4YearsAgo
0%
30%
60%
90%
120%
4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today
Core Features Single Sign On Integrations Analytics
Q: How has software willingness to pay (WTP) evolved over time?
A: Software willingness to pay has declined significantly over the
past few years due to increased options and higher demands.

CAC is steadily increasing over time.

Q: How has customer acquisition cost (CAC) evolved over time?
A: Customer acquisition cost has increased significantly over the years
due to market saturation of marketing vying for consumer attention.
BlendedCACas%ofblendedCAC4
YearsAgo
-15%
0%
15%
30%
45%
60%
4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today
B2B B2C
N = 437 companies per line

We make matters worse by focusing on the
wrong fundamentals.

Q: Which pillar of your business is the most important to your growth?
A: Founders and software executives overwhelmingly put
their support behind acquisition based growth.
%oftotalrespondents
0%
25%
50%
75%
100%
More logos Making more money per customer Keeping customers around longer

There are clear winners and
losers in this environment.

Q: What was the growth focus of companies that died in the past couple of years?
A: Of 90 companies that died in the past 3 years, the majority
of them were focused on acquisition based growth.
N = 90 companies that went out of business or were fire sold in the past 36 months
%ofCompanies
0%
25%
50%
75%
100%
Less than $10M ARR $10.01M to $25M ARR $25.01M+ ARR
Primarily Acquisition Growth Balanced Growth

Q: How does growth compare between acquisition based companies and their balanced counterparts?
A: Acquisition based growth companies grow at a smaller rate than those
with a balanced growth approach (growth from all three pillars of growth).
N = Minimum of 512 companies per segment pulled from the middle 2/3 of companies in terms of growth rate. This,
along with a dampening model was used to control for outlier spikes in growth rate.
%ofCompanies
0%
14%
28%
41%
55%
2012 2013 2014 2015
Primarily Acquisition Growth Balanced Growth

Q: How does growth compare between perpetual and subscription software companies?
A: Subscription software company growth is outpacing that
of perpetual based software companies.
N = Minimum of 512 companies per segment pulled from the middle 2/3 of companies in terms of growth rate. This,
along with a dampening model was used to control for outlier spikes in growth rate.
%ofCompanies
0%
14%
28%
41%
55%
2012 2013 2014 2015
Perpetual Subscription

Q: If we improve each area of a software business equally, what’s the relative impact on revenue?
A: Monetization and retention based growth far outpaces
acquisition based growth.
%impactonrevenue
0%
2%
5%
7%
9%
12%
14%
Acquisition Monetization Retention
3.32%
N = Data from 734 software companies

%impactonrevenue
0%
2%
5%
7%
9%
12%
14%
6.71%
3.32%

%impactonrevenue
0%
2%
5%
7%
9%
12%
14%
6.71%
12.7%
3.32%

%impactonrevenue
0%
3%
6%
9%
12%
15%
18%
9.32%
15.89%
2.35%
6.71%
12.7%
3.32%
2008 - 2012 2013 - 2016

The root cause is we don’t
know our buyers.

Q: Which single category describes your buyer personas internally?
A: When asked, SaaS founders and executives indicated that their
company’s buyer personas weren’t well defined or centralized.
%ofrespondents
0%
20%
40%
60%
80%
100%
Thought about them Central document Quantified buyer personas
6.6%
36.6%
56.8%
N = 1,647 SaaS Founders and Executives

Q: How many customer development conversations (non-sales) are you having per month?
A: SaaS founders and executives indicated that their companies are primarily
only talking to less than 10 customers in a cust dev capacity per month.
%ofrespondents
0%
20%
40%
60%
80%
100%
10 or less 11 to 25 26 to 50 51+
3.9%10.1%17.7%
68.3%

Q: How many experiments are you running per month (including marketing experiments)?
A: SaaS founders and executives indicated that their companies
are overwhelmingly running less than 10 experiments per month.
%ofrespondents
0%
20%
40%
60%
80%
100%
0 1 to 3 4 to 10 11+
2.7%12.1%
37.8%
47.8%

The is should be scary.

Point of Conversion
Offer Product #1
Justify price #1 Offer Product #1
Justify price #1
Offer Product #1
Justify price #1
Drive Customer #1 Drive Customer #2 Drive Customer #3
Buyers are the central tenet of your business

Recognizing the problem is step 1.

Step 2 is learning
how to solve the problem.

7:30 AM
8:30 AM
9:00 AM
9:30 AM
10:00 AM
10:30 AM
11:00 AM
11:30 AM
12:00 PM
12:30 PM
1:00 PM
Registration And Breakfast
Welcome And State Of SaaS
Patrick Campbell
You’re Too Focused On Product/Market
Fit
Brian Balfour
Why Half Of You Will Go Out Of Business:
The Move From Cloud First To Customer
First
David Cancel
Embracing Humility: 5 Ways You’re
Probably Failing Your Customers And
What You Can Do About It
Tara Robertson
Consciously Cultivating Raving Fans
Heidi Jannenga
Break
Retention Throughout The Entire Funnel
Rob Walling
Building A SaaS Company Isn’t What It
Used To Be: Your Competition Now
Matters
Hiten Shah
How Video Is The Future Of Marketing
Naike Romain
Lunch
2:00 PM
2:30 PM
3:15 PM
3:45 PM
4:15 PM
4:45 PM
5:15 PM
5:45 PM
7:15 PM
An Actual, Practical Conversation Around
Growth
Suneet Bhatt
Turning Around A Company With Growth
In 90 Days
Drew Sanocki
The Hidden Talents Of Email (Yes, Email):
Creating Customer-Centric Messages
Justine Jordan
Modeling Freemium: Lessons Learned
Along Insightly’s Journey
Karl Laughton
Break
From Startup To IPO: Unconventional
Lessons From The Pricing Trenches
Brad Coffey
Pivoting To A New Market: A Real-World
Lesson In Pricing and Personas
John Marcus III
Forget Your Feelings: Here’s How To
Quantify Your Buyer Personas
Patrick Campbell
After Party
Mija Cantina & Tequila Bar
Faneuil Hall Marketplace
1 S Market St
Boston, MA 02109

Two ground rules.

Pitching.

Follow the golden rule.

State of SaaS - SaaSFest 2016

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State of SaaS - SaaSFest 2016