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Benchmarking SaaS 
Companies 
Tomasz Tunguz 
Redpoint Ventures 
tomtunguz.com
$250k - $40M in 
Seed, Series A, B, Growth 
Menlo Park, China, Brazil 
Lots of *aaS
tomtunguz.com
Environment
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Benchmarking SaaS Companies
SaaS Benchmarks
Methodology 
• Basket of 41 publicly traded SaaS companies 
• Measure progress from years since founding 
• Segment by ACV
Revenue
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Payback Period 
= 
Gross Margin 
÷ 
CAC
Benchmarking SaaS Companies
Revenue per 
Employee
Benchmarking SaaS Companies
Benchmarking SaaS Companies
Department Spend
Benchmarking SaaS Companies
Sales to Engineering Ratio 
Year Since 
Founding 
1 2 3 4 5 6 7 
Median 
Revenue in $M 
3 4 11 25 55 70 98 
Sales : Eng 
Ratio 
1.5 3.5 2.0 1.7 1.9 2.4 2.1 
Sample Size 1 1 5 9 12 16 18
Capitalization
Benchmarking SaaS Companies
Evolution of SaaS Fund Raising 
IPO 
Cohort 
Median 
VC$ 
Raised 
Median # 
of Rounds 
Median 
Round Size 
$M 
Median IPO 
Size 
1998 42 2.5 17 97 
2002 71 3.0 24 86 
2006 66 4.0 16 122 
2010 101 4.5 22 137
Sales
Benchmarking SaaS Companies
Sales Efficiency in Year Five 
Ticker 
Gross Profit 
in $M 
Sales 
Efficiency 
ACV 
VEEV 72.5 3.3 780,000 
XERO 2.6 1.9 195 
WDAY 40.5 1.7 512,615 
DWRE 5.9 1.7 122,294 
ZEN 25.0 1.4 1,800
Benchmarking SaaS Companies
How to Construct Quota 
Deal Velocity per Month 
1 2 3 4 5 6 7 8 
1 12 24 36 48 60 72 84 96 
5 60 120 180 240 300 360 420 480 
ACV in 
$K 
10 120 240 360 480 600 720 840 960 
20 240 480 720 960 1,200 1,440 1,680 1,920 
50 600 1,200 1,800 2,400 3,000 3,600 4,200 4,800 
100 1,200 2,400 3,600 4,800 6,000 7,200 8,400 9,600
Quotas 
Inside Sales 
250k 500k 750k 
Outside Sales 
750k 1.2M 2.0M
Lead to Close Conversion Rates 
Freemium 
2% 3% 4% 
Inside Sales 
15% 20% 30%
Customer Success 
Maximizing your negative churn
Benchmarking SaaS Companies
Benchmarking SaaS Companies
3,000,000 
2,250,000 
1,500,000 
750,000 
0 
Churn’s Impact on Revenue Growth 
4% 2% 0% -2% -4% 
1 8 15 22 
MRR in $ 
Months
Sales and Marketing Spend Required to Double 
8.5 
5.8 
Revenue 
3.8 
2.2 0.9 
4% 2% 0% -2% -4%
$ 
2-and-Out Customer 
0 15 24 36 
months in customer life 
MRR 
Cost of Customer 
Acquisition + 
Cost to Serve 
Contribution
$ 
Renewed Customer, with Customer Success Investment 
0 15 24 36 
months in customer life 
MRR 
Cost of Customer 
Acquisition + 
Cost to Serve 
CS 
Contri-bution 
Contribution 
21
$ 
Churned Customer, Despite Customer Success Efforts 
0 15 24 36 
months in customer life 
MRR 
Cost of Customer 
Acquisition + 
Cost to Serve 
CS 
Contri-bution 
21
How much? 
Expected Value = 
Save Rate x Value of Extension 
EV = 
30% * 12 months * 83 = 
$298 
About 30% of ACV 
An existing customer is much less expensive to 
retain than to acquire a new customer
Thank you 
Tomasz Tunguz 
Redpoint Ventures 
tomtunguz.com
Benchmarking SaaS Companies

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Benchmarking SaaS Companies

  • 1. Benchmarking SaaS Companies Tomasz Tunguz Redpoint Ventures tomtunguz.com
  • 2. $250k - $40M in Seed, Series A, B, Growth Menlo Park, China, Brazil Lots of *aaS
  • 12. Methodology • Basket of 41 publicly traded SaaS companies • Measure progress from years since founding • Segment by ACV
  • 18. Payback Period = Gross Margin ÷ CAC
  • 25. Sales to Engineering Ratio Year Since Founding 1 2 3 4 5 6 7 Median Revenue in $M 3 4 11 25 55 70 98 Sales : Eng Ratio 1.5 3.5 2.0 1.7 1.9 2.4 2.1 Sample Size 1 1 5 9 12 16 18
  • 28. Evolution of SaaS Fund Raising IPO Cohort Median VC$ Raised Median # of Rounds Median Round Size $M Median IPO Size 1998 42 2.5 17 97 2002 71 3.0 24 86 2006 66 4.0 16 122 2010 101 4.5 22 137
  • 29. Sales
  • 31. Sales Efficiency in Year Five Ticker Gross Profit in $M Sales Efficiency ACV VEEV 72.5 3.3 780,000 XERO 2.6 1.9 195 WDAY 40.5 1.7 512,615 DWRE 5.9 1.7 122,294 ZEN 25.0 1.4 1,800
  • 33. How to Construct Quota Deal Velocity per Month 1 2 3 4 5 6 7 8 1 12 24 36 48 60 72 84 96 5 60 120 180 240 300 360 420 480 ACV in $K 10 120 240 360 480 600 720 840 960 20 240 480 720 960 1,200 1,440 1,680 1,920 50 600 1,200 1,800 2,400 3,000 3,600 4,200 4,800 100 1,200 2,400 3,600 4,800 6,000 7,200 8,400 9,600
  • 34. Quotas Inside Sales 250k 500k 750k Outside Sales 750k 1.2M 2.0M
  • 35. Lead to Close Conversion Rates Freemium 2% 3% 4% Inside Sales 15% 20% 30%
  • 36. Customer Success Maximizing your negative churn
  • 39. 3,000,000 2,250,000 1,500,000 750,000 0 Churn’s Impact on Revenue Growth 4% 2% 0% -2% -4% 1 8 15 22 MRR in $ Months
  • 40. Sales and Marketing Spend Required to Double 8.5 5.8 Revenue 3.8 2.2 0.9 4% 2% 0% -2% -4%
  • 41. $ 2-and-Out Customer 0 15 24 36 months in customer life MRR Cost of Customer Acquisition + Cost to Serve Contribution
  • 42. $ Renewed Customer, with Customer Success Investment 0 15 24 36 months in customer life MRR Cost of Customer Acquisition + Cost to Serve CS Contri-bution Contribution 21
  • 43. $ Churned Customer, Despite Customer Success Efforts 0 15 24 36 months in customer life MRR Cost of Customer Acquisition + Cost to Serve CS Contri-bution 21
  • 44. How much? Expected Value = Save Rate x Value of Extension EV = 30% * 12 months * 83 = $298 About 30% of ACV An existing customer is much less expensive to retain than to acquire a new customer
  • 45. Thank you Tomasz Tunguz Redpoint Ventures tomtunguz.com

Notes de l'éditeur

  1. Let me give you a little bit of background on red point. We invest in every part of technology stack, from consumer applications like secret to enterprise software like zuora and mapr, to developer services like stripe and twilio, and infrastructure companies like pure storage We have 11 partners and most of them are based in California. We have a team in China that is invested in some of the largest companies there. And we have a team in the fund in Brazil who cover South America for us. We also have the notable distinction of being the only venture capital firm in the world with two former ATMs on staff, Jamie Davidson (YouTube and I)
  2. Blog extensively at tomtunguz.com Data driven analysis
  3. Let’s first set some context about the environment It’s a bull market
  4. B of USD entering the venture market black line is the post dot com median 2014 will be the fourth largest in 14 years
  5. In terms of dollars deployed, invested into companies, 2014 is on track to exceed $40B, making it the second largest year since the dot com era
  6. This dollars have been raised by many new firms, particularly institutional seed stage
  7. All that capital is increasing the amount of capital deployed per investment in the US. Median across A, B, C.
  8. Meanwhile in the publlic markets, there’s a bit of a different story. NTM revenue to market 2.2B market cap - 3x in 2004 and 6X in 2005
  9. Split it by high growth WorkDay, Splunk, ZenDesk, DemandWare, LinkedIn tale of two markets relative stability of the standard markets, much greater variance in the high growth companies, still trading at 12x, which is similar to private market multiples, particularly in the growth stage.
  10. Median publicly traded SaaS company achieves $11M by third year, reaching about $64M in year six, the year before IPO. After that, growth tends to slow.
  11. Looking at the data at a bit more granular level. Each point represents a year for a SaaS company. At the beginning, SaaS companies are growing close to 200% per year, and that number begins to taper reaching about 100% by year five and then 50% by year seven.
  12. Let’s break this out by segment: SMB is < $10k acv; mid market is < $100k ACV; http://tomtunguz.com/segmenting-saas-growth/
  13. http://tomtunguz.com/fundraising-history-saas-publics/ Median is 70M The number of rounds of financing each company raises before IPO has nearly doubled from 2.5 to 4.5, i.e. Series B/C to Series D/E. These figures exclude seeds, which I’ve defined as rounds less than $1.5M.
  14. Inflation adjusted in 2014 dollars $32M on the balance sheet at IPO time, spent $69 during the seven years
  15. This is list of publicly traded saaS companies by acv at time of IPO Huge range Median is $30k
  16. Amazingly, sales efficiency isn't actually tied to ACV. These are the top five most efficient sales organizations. Huge variance in sales efficiency
  17. Here’s the data broken down by segment and shown over time. Monotonically decreasing No statistically significant difference among the companies Early on, sales efficiency should be close to one and then ideally plateau to 0.8, which is the median The median SaaS company selling a $1M product declines from a sales efficiency of 1.7 to 0.9 in about 6 years, a 47% drop. In contrast, the $50k ACV median falls 9%.
  18. Quotas What sizes of quotas do we typically see Function of acv and deal velocity; we’ll get into that in a second