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ACV is a vanity metric

by

Sammy Abdullah

The world’s biggest and best software companies tend to have smaller ACV’s. Below is a data set of 78 publicly traded SaaS companies and their estimated ACV’s at exit/when they went public. To do the analysis, we looked at each Company’s financials before going public and compared their annual revenue to the number of customers at the end of the year. Upon going public/exiting, the median ACV was only $24,186. This makes sense as the universe of companies that can afford a lower ACV is much higher than those that can afford a $50,000+ ACV so by focusing on a lower ACV, you can grow into a bigger company and exit faster.

ACV is a metric that should be monitored, but don’t change the way you sell in order to artificially increase it. While metrics like ACV are valuable, the real metrics you should be focused on are revenue, cash flow, retention, and growth. ACV is an effect of these metrics, not a cause.

Visit us at blossomstreetventures.com and email us directly with Series A or B opportunities at sammy@blossomstreetventures.com

Sammy Abdullah

Managing Partner & Co-Founder

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