Public SaaS has Net Retention of 100%+

One SaaS metric VC pay close attention to is net retention.  It tells you what percent of revenue you retained from the prior year, after accounting for upgrades, downgrades, and churn.  Formulaically it’s beginning of period revenue + upgrades – downgrades – churn.   If that formula yields a number greater than beginning of period revenue, then you’ve got net retention in excess of 100%.  It’s where you want to be because it means the growth from your existing customer base more than offsets any losses from that customer base. 

 

On the flip side, net retention below 100% means churn and downgrades were greater than any growth you enjoyed from the expansion of existing customers.  If that’s the case, you need to take action with Customer Success and Customer Support to try and reverse the trend (generally we find it’s not a product issue, but rather an issue of not contacting/supporting customers often enough). 

 

So what’s a good level of net retention? The data below shows the net retention of 20 publicly traded SaaS companies since 2013.  As you can see, the trend is stable: median net retention in 2016 was 99% and the average was 105%.  These figures haven’t deviated much from past median and averages.  That said, the top 5 companies had net retention averaging 121% and the top 10 are at 112%.   So to answer our question at the beginning of the paragraph, as the data show net retention of 99% is average, 112% is good/better than average, and 121% is exemplary.     

 

    2013 2014 2015 2016
Name Ticker Retention Retention Retention Retention
Marketo, Inc. MKTO 100% 109% 105% acquired
Cvent, Inc.  CVT --- 100% 100% acquired
Demandware, Inc. DWRE 100% 100% 100% acquired
Veeva Systems Inc. VEEV --- 138% 125% 127%
New Relic, Inc. NEWR --- 110% 130% 125%
2U TWOU 144% 112% 120% 123%
Blackline BL --- 118% 120% 116%
Box, Inc. BOX 144% 126% 117% 115%
Zendesk, Inc. ZEN --- --- 123% 115%
Instructure INST 100% 100% 100% 100%
Five9, Inc.  FIVN 100% 96% 96% 100%
Xactly XTLY --- 104% 105% 99%
RingCentral, Inc. RNG --- 99% 99% 99%
HubSpot, Inc. HUBS 83% 93% 99% 99%
SecureWorks SCWX 99% 96% 108% 98%
Apptio APTI --- --- 100% 98%
Cornerstone OnDemand, Inc. CSOD 95% 94% 95% 95%
Benefitfocus, Inc. BNFT 95% 95% 95% 95%
Castlight Health, Inc.  CSLT --- 103% 116% 94%
Proofpoint, Inc. PFPT 90% 90% 90% 90%
           
           
MEDIAN   100% 100% 103% 99%
AVERAGE   105% 105% 107% 105%

 

As a founder, net retention should be as important to you as new bookings growth as it’s an indication of the health of the customer base, product-market fit, and the stickiness of the product.   Strive to get at least above 100% so you’re keeping the customers you have, but if you can achieve 112%+, your customer base will be a significant source of annual growth. 

 

Want to be notified any time we put up a new post? Email me at sammy@blossomstreetventures.com to be added to the list.  

Blossom Street Ventures. All Rights Reserved.
Web Site Design by Idealgrowth