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Similar to 2017 SaaS Benchmarks (20)
2017 SaaS Benchmarks
- 2. About this Survey
Earlier this summer, we surveyed 300 enterprise software companies ranging from pre-revenue to more than $20
million in ARR and across every software category. The point of this survey was to gain a better understanding of
how software companies are performing as a whole, and to help companies understand how they measure up
against their peers – and not just a handful of well-known unicorns.
With our findings, we aim to reframe the conversation of how the tech ecosystem defines success in a growing
software business. Success shouldn’t only be defined by an IPO in five years. Success means building a
sustainable and enduring business that improves the lives of its employees, customers and shareholders alike.
Special Thanks to Our Partners
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- 3. A Look at Who We Surveyed
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- 4. You have a 0.1% chance of reaching $100M in 5 years.
In the boardroom, you’ve probably been told that after you hit your first $1M in ARR, you should triple twice then
double three times (known popularly as T2D3), ultimately reaching $100M ARR about 5 years later. But, of the ten
most recent enterprise SaaS IPOs, only two – Nutanix and Cloudera (they collectively burned about $1.4 billion) –
managed to actually grow at this breakneck speed. A handful of others were close behind, but half of them took
eight or more years.
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- 5. The companies shown above have been wildly successful, but most don’t meet the inflated growth expectations
put on them by investors and outside market pressure – and these companies are the lucky few that have
managed to IPO.
On the other hand, there are 5,000 venture-backed SaaS companies in North America that haven’t yet managed to
IPO, but that make decisions about their business as if it’s realistic and even expected that they hit T2D3.
Companies that fall into this trap often over-hire and ultimately burnout trying to reach this near impossible
benchmark.
To put it another way, only a handful out of the 5,000+ venture backed SaaS companies managed to hit $100M in 5
years and they required an enormous amount of capital to do so (read: up to $1B in some cases). Creating
budgets around assumptions of performing like a statistical outlier seems a bit absurd to us.
KEY TAKEAWAY: Let’s reframe what it means to be a top performing SaaS company. You can build an enduring
business by growing smart and sustainably – don’t feel boxed in by the T2D3 rule.
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- 6. Growth at all Costs Will Only Get You So Far
It’s common for startups to grow
rapidly early on. But after $5M in
ARR, the median growth rate
plummets, falling to 50%. It slows
even further once companies reach
$20M in ARR, down to less than 30%
on average.
KEY TAKEAWAY: The real test for
SaaS companies comes then in
maintaining an accelerated growth
rate as you hit scale, or in balancing
growth and profitability.
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- 7. Are you wasting your sales & marketing dollars?
Sales and Marketing spend is consistently
the biggest line item on a startup’s balance
sheet once a company hits $1M ARR –
before that it’s R&D.
It peaks at 50% of ARR at the expansion
stage. Too many companies underinvest in
sales productivity, saddling them with huge
costs without the ROI.
KEY TAKEAWAY: Start tracking time to
quota of individual reps today and invest in
training, technology and processes that will
help you reduce ramp time for each new
hire.
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- 8. access the full report at
benchmarks.openviewparnters.com
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