Two metrics we use to compare software businesses are revenue per employee and operating expense (“opex”) per employee. Note that opex includes R&D, S&M, G&A, but excludes COGS. 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 75 SaaS IPOs is below (since 2017).
Why we use recent IPO’s. The reason we like looking at companies at the time of IPO is because: i) an IPO is an exit event that receives intense investor scrutiny so companies tend to really tighten and optimize operations; and ii) companies at IPO are closer to the Series A to Series D companies that we invest in.
Headcount. The median headcount of these companies at IPO was 885 with the average coming in slightly higher at 1370. The largest company was McAfee (6850 employees) and the smallest was Expensify (140). Rubrik and Klaviyo, the most recent IPO’s, had 3100 and 1548 employees respectively.
Revenue per head. Rev/head on median was $198k with a range of $19k (SentinelOne) to $789k (Rubrik).
Opex per head. Opex/head on median was $175k with a range of $36k (SentinelOne) to $576k (Confluent). Remember our definition of opex includes R&D, S&M, and G&A, but excludes COGS.
The difference is small. The difference between revenue/head and opex/head is quite tight and indeed once you factor in COGS, only 20 out of the 75 generate operating income.
Thank you for your readership. Visit us at blossomstreetventures.com for more SaaS data and blogs. Email the author at sammy@blossomstreetventures.com
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