SAN FRANCISCO, Oct. 17, 2017 /PRNewswire/ -- KeyBanc
Capital Markets Inc. (KBCM), the corporate and investment banking
unit of KeyCorp (NYSE: KEY), today released results from its
Technology Group's 8th annual Private SaaS Company
Survey (formerly known as the Pacific Crest Securities Private SaaS
Company Survey), the yardstick by which the cloud software industry
measures financial and operating performance. While findings show
very strong growth for private Software-as-a-Service (SaaS)
companies as a whole (47 percent median growth rate), many of the
companies are still early in their development. The median growth
rate drops to 25 percent for companies with over $25 million in revenues and just one-in-five of
those companies with over $25 million
in revenues experienced growth rates over 50 percent.
Responses for the survey, the longest running and most extensive
of its kind, were solicited from senior executives at nearly 400
private SaaS companies. For the first time, this year's survey also
provided detail on just how much investment capital it takes to
build SaaS businesses. Companies in the survey group consumed a
median of $1.5 million in capital for
each $1 million of annual recurring
revenue (ARR).
"SaaS continues to be among the most exciting and fastest
growing markets in technology, which these survey results bear out.
What's underappreciated, though, is just how hard it is to sustain
massive growth at scale," said David
Spitz, managing director of KBCM's Technology Group and
primary author of the survey. "SaaS companies and their investors
continue to push their businesses to perform at the highest levels.
Our analysis provides these companies the tools and data needed to
assess where they stand, and what they can do to improve their
operations, unit level economics and capital efficiency."
Among key performance metrics from the 2017 survey:
- Application delivery – The large majority of companies
(76 percent) now use third parties to deliver their SaaS
applications, with only 24 percent delivering their applications on
self-managed servers. Amazon Web Services is by far the most
utilized third-party service provider, with 70 percent market
share.
- The Rule of 40% – One-in-four private SaaS companies at
scale surveyed are operating at or above "The Rule of 40%," a much
discussed key measure of best-in-class SaaS company performance
calculated by adding a company's revenue growth rate and
profitability margin. For companies with more than $15 million in ARR, those that meet or exceed The
Rule of 40% have markedly lower churn (6.3 percent vs. 8.3
percent), Customer Acquisition Cost (CAC) Ratio for new customers
($1.11 vs. $1.29) and a better capital efficiency ratio
(0.94 vs. 1.64) compared to their counterparts.
- CAC Ratio – Companies of more than $5 million in ARR spent a median of $1.15 to acquire each dollar of new ARR from a
new customer. By comparison, companies only spent half that amount
($0.57) to acquire each new dollar of
upsell ARR, up from $0.27 last
year.
David Skok, investor at Matrix
Partners, author of the SaaS-focused blog forentrepreneurs.com and
active supporter of the survey for the past six years, added: "SaaS
companies are unique in that most require high upfront sales and
marketing costs and delayed revenue collection. This leads to a
cash flow trough where they are actually losing money in the early
years. Because of this, it's extremely important to be able to
benchmark and track core metrics so they know, even while in the
cash flow trough, whether the business will work in the long term.
The survey enables the kind of deep data and insights that SaaS
companies need in order to benchmark and track their performance
over time."
The Private SaaS Company Survey establishes operational and
financial benchmarking data for executives and investors in SaaS
companies, from go-to-market selling strategies, customer retention
rates and customer acquisition costs, to operational management,
growth and margin structures. Full survey results are available
online.
About the KBCM Technology Group Private SaaS Company
Survey
The KBCM Technology Group Private SaaS Company Survey
was first developed by Pacific Crest Securities in 2011 to provide
benchmark performance metrics for SaaS companies. Pacific Crest was
acquired by KBCM in 2014 and rebranded as KBCM Technology Group,
combining the technology specialist approach of Pacific Crest with
the expanded capabilities and broader resources of KBCM and its
parent, KeyCorp (NYSE: KEY). Approximately 400 senior executives
from SaaS companies around the world participated anonymously and
confidentially in the 2017 survey. Responses were submitted online
between June and July 2017. KBCM
cannot verify accuracy of responses. Observations and commentary
contained herein relate solely to the survey results and cannot
necessarily be applied elsewhere. For more information about the
KBCM Technology Group, please visit us online.
About KeyBanc Capital Markets
KeyBanc Capital Markets
is a leading corporate and investment bank providing capital
markets and advisory solutions to dynamic companies capitalizing on
opportunities in changing industries. Our deep industry expertise,
broad capabilities and unique ideas are seamlessly delivered to
companies across the Consumer & Retail, Diversified Industries,
Healthcare, Industrial, Oil & Gas, Real Estate, Utilities,
Power & Renewables, and Technology verticals. With over 800
professionals across a national platform, KeyBanc Capital Markets
has more than $30 billion of capital
committed to clients and an award-winning Equity Research team that
provides coverage on over 700 publicly-traded companies. KeyBanc
Capital Markets is a trade name under which corporate and
investment banking products and services of KeyCorp and its
subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC
("KBCMI"), and KeyBank National Association ("KeyBank N.A."), are
marketed. Securities products and services are offered by KeyBanc
Capital Markets Inc. and its licensed securities representatives,
who may also be employees of KeyBank N.A. Banking products and
services are offered by KeyBank N.A.
About KeyCorp
KeyCorp's roots trace back 190 years to
Albany, New York. Headquartered in
Cleveland, Ohio, Key is one of the
nation's largest bank-based financial services companies, with
assets of approximately $135.8
billion at June 30, 2017. Key
provides deposit, lending, cash management, insurance, and
investment services to individuals and businesses in 15 states
under the name KeyBank National Association through a network of
more than 1,200 branches and more than 1,500 ATMs. Key also
provides a broad range of sophisticated corporate and investment
banking products, such as merger and acquisition advice, public and
private debt and equity, syndications, and derivatives to middle
market companies in selected industries throughout the United States under the KeyBanc Capital
Markets trade name. For more information, visit
https://www.key.com/. KeyBank is Member FDIC.
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