Fresh Insights

Analyses, Musings & Observations

Payback period data in SaaS

It’s ok and even desirable to be unprofitable when you’re adding revenue at an acceptable cost and you’ve got 100%+ net dollar retention, meaning you never lose the customer and actually grow them over time. In order to measure the acceptable cost of new SaaS revenue, we look at new revenue vs operating loss, and…
Read More

SaaS revenue and opex per employee data

Two metrics we use to compare software businesses are revenue per employee and operating expense (opex) per employee. In our view these are great measures of operational efficiency. What is a reasonable amount of rev/head and opex/head in SaaS? The data from the last 73 SaaS IPOs is below (since 2017). Headcount. The median headcount…
Read More

SaaS spend ratios on R&D/S&M/G&A

The general rule of thumb for spending in SaaS is 40/40/20. In other words, 40% of operating expense should be on R&D, 40% should be on sales and marketing, and 20% should be on G&A. Rules of thumb are just generalizations, so we wanted to see what the data really is. 73 SaaS companies have…
Read More

State of SaaS – Q1 metrics and financials

We keep close track of every SaaS IPO in the past five years (since MongoDB in October 2017). Those 67 companies have finally all issued their Q1 2022 earnings. Below we summarize key financials and metrics. We will update this post when all Q2 earnings are released likely at the end of September. Median quarterly…
Read More

Q1 Net Dollar Retention Data

We keep close track of every SaaS IPO in the past five years (since MongoDB in October 2017). Those 67 companies have finally all issued their Q1 2022 earnings. Below we summarize net dollar retention for those that shared it. Only 55% report their NDR. Of the 67 SaaS companies we follow, only 55% of…
Read More

Learnings from a SaaS IPO – Samsara

Samsara is a software company that went public in 2021. Below are some of the highlights and learnings from their prospectus. What they do. Samsara “allows businesses that depend on physical operations to harness IoT data to develop actionable business insights and improve their operations. Using our Connected Operations Cloud, customers can visualize their physical…
Read More

Learnings from a founder that sold to FB

I read “Chaos Monkeys, Obscene Fortune and Random Failure in Silicon Valley.”  The book is a 2015 vintage, but a lot of the lessons and take-aways are relevant today.  It’s a great read that I would highly recommend; key excerpts are below.   FB’s data isn’t that valuable.  “The miserable conclusion was that Facebook, though…
Read More

Growing your SaaS cohorts

Before we get into the meat of this post, first, a quick refresher: a cohort is a group of customers acquired at a particular time; for instance the “January 2018” cohort would be those customers who were acquired in January 2018. One very important measure in SaaS is cohort growth. Often times this is depicted…
Read More

SaaS M&A multiples at ~7.6x

PING is being acquired by Thoma Bravo, which means we have another software M&A comp. Alongside multiples of publicly traded SaaS companies, public SaaS acquisitions are some of the most relevant you can look at for deriving SaaS revenue multiples. These transactions are all cash, the financials are public and audited, and these are all…
Read More

International can unlock SaaS growth

If you’re looking for your next leg of growth, look to international markets. Below are examples of software companies and B2C companies that IPO’d in 2021, where international expansion is a key to future growth. Quotes are taken directly from prospectuses of each company. Samsara. “we have a growing international presence, with approximately 10% of…
Read More