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No investors needed.
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The founder creates the pitch, defines the team roles and their equity awards.
Talented people apply to the equity-based roles, the founder selects the best.
When all goals have been met the founder awards the equity and launches the startup.
The starting point for understanding a SaaS business is revenue growth – the best proof of product-market fit.
Dollar Retention takes expansion revenue into account, and can be greater than 100% if expansion exceeds churned and contracted revenue.
Logo Retention: Logo Retention measures the percent of customers that stay active. As a result, Logo Retention is usually much lower than Dollar Retention.
MRR or ARR: Annual Recurring Revenue (ARR) is the standard for SaaS companies that sell annual subscription contracts, or Monthly Recurring Revenue (MRR) for those selling monthly subscriptions. If your company sells both, choose the metric that represents the majority of revenue. ARR is always 12 x MRR. Note the requirement that the contract is “recurring” (ongoing); one-time revenue, such as for
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Hubspot is aiming to cross $1 billion in ARR in 2020 (with an ACV of $10K). What you can learn from their super sustained growth? Here are some data points:
– Freemium remains the source of 60% of HubSpot’s customers, even at almost $1b in ARR.
– International is 40% of revenues today and a growth accelerator.
– Even with more products, ACV still at ~$10k at 69,000 customers.
– 40% of their revenue comes from partners and the channel
– Even with more products, ACV still at ~$10k at 69,000 customers
[Via]
David Skok, a General Partner at Matrix, provides key insights into how a SAAS company should look for success by using its metrics and smartly managing the most important ones amongst them. SAAS economics is a pretty complicated business, and in this talk for Saastr, David helps break down many vital concepts.
Key Takeaways:
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The rule of thumb for growth rate expectations at a successful SaaS company being managed for aggressive growth is 3, 3, 2, 2, 2: starting from a material baseline (e.g. over $1 million in annual recurring revenue (ARR)), the business needs to triple annual revenues for two consecutive years and then double them for three consecutive years. A funded SaaS business which consistently grows by 20% per year early in its life is likely a failure in the eyes of its investors.
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Great piece of advice on different sales models for SAAS companies by Patrick of Stripe.
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