Growing your SaaS cohorts

by

Sammy Abdullah

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 in the form of a chart in which the revenue of the cohort is shown over time. Examples from the prospectus’ of Cloudflare, Datadog, and Livongo are below. A chart that is sloping upwards and to the right is what you want as it means your cohorts are a source of revenue growth (you are expanding bookings within the existing customer base), and the steeper the slope the better. Additionally, upward sloping cohorts mean net dollar retention is in excess of 100%, which is where you want it. For instance, Datadog enjoys net dollar retention of 146%, which is remarkable; net dollar retention is the difference between the ARR of a customer cohort when you first acquired them and ARR at some point in the future, usually 1 year later.

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sammy@blossomstreetventures.com

Sammy Abdullah

Managing Partner & Co-Founder