Average Contract Value is (“ACV”) is a vanity metric that should be looked at as part of a group of ratios that include number of qualified leads, close ratio, sales cycle, and other critical sales metrics. It shouldn’t be put on a pedestal. Here is why: The world’s biggest and best software companies tend to […]
110% Net Dollar Retention Is The Benchmark
One SaaS metric we monitor closely is net dollar retention. It tells you what percent of revenue from current customers you retained from the prior year, after accounting for upgrades, downgrades, and churn. Formulaically it’s beginning of period revenue + upgrades – downgrades – churn all divided by beginning of period revenue. If that formula […]
How Much Cash can Your SaaS Co burn?
Cash efficiency is one of our favorite metrics in SaaS. Measured as recurring revenue in the latest year / equity + debt invested, it’s every bit as important as growth. We did an analysis looking at the revenue, equity, and debt of 88 publicly traded SaaS companies at the time they went public. Using the […]
SaaS valuations made a comeback
SaaS multiples look great and made a nice comeback from Q4 2018: of the 72 SaaS companies we follow, the average public SaaS business is trading at 10.51x revenue while the median is 8.94x. Interestingly, the gap between the average and median has never been larger for the time period shown, meaning more attractive SaaS companies are being rewarded with big premiums.
The Series A Valuation Report
What valuations are founders asking for when they raise their Series A? Since May 2018, we’ve had conversations with 329 companies about their Series A rounds. Below is aggregate data on these raises with names redacted to preserve confidentiality. Figures like revenue, valuation, and round size are medians from conversations with founders. Remember the valuations […]
Don’t obsess over Average Contract Value
Average Contract Value is (“ACV”) is a vanity metric that should be looked at as part of a group of ratios that include number of qualified leads, close ratio, sales cycle, and other critical sales metrics. It shouldn’t be put on a pedestal. Here is why: The world’s biggest and best software companies tend to […]
Don’t forget about one-time revenue
Everyone loves recurring revenue and rightly so: it’s far more valuable than one-time revenue to VC and acquirers. But, don’t forsake one-time revenue. Whether it’s for services, onboarding, licensing, or some other one-time event, revenue of this type is incredibly valuable especially at early stages. There are three big reasons it’s valuable: It’s a Source […]
SaaS companies spend 23% of revenue on R&D
Today’s syndicated article was written by Sammy Abdullah, Co-Manager at Blossom Street Ventures. The chart below is a good set of data from recent SaaS IPOs and their R&D spend. Building out, maintaining, and upgrading a technology stack requires a constant commitment to developers and engineers, so what is an appropriate level of development or R&D expense […]
CAC Doesn’t Have to Rise as You Grow
One of the most important metrics for B2C companies is customer acquisition cost or “CAC”. One debate is whether the cost rises or falls over time. The argument for rising CAC is the next marginal customer is generally harder to acquire than your last customer. The argument for falling/stable CAC is that as companies get […]
