AA - REPORT Expansion SaaS Benchmarking Study

EXPANSION SAAS
BENCHMARKING STUDY
Kyle Poyar September 2017
Proprietary and Confidential 2017 OpenView Investments, LLC. All Rights Reserved 1
INTRODUCTION
BACKGROUND
Enterprise software has seen explosive growth in 2017, led by successful exits of MuleSoft,
Okta and AppDynamics, just to name a few. To help emerging startups set themselves up for
similar long term success, we launched the 2017 Expansion SaaS Benchmarking Study.
The survey was live from May-July 2017 and included questions about size, funding, growth,
talent, go-to-market strategy, diversity and other important KPIs to operating a startup.
PARTICIPANTS
300 enterprise software companies participated in the survey, including a mix by company
size (<$1M ARR to $60M+ ARR) and software category (infrastructure, application, etc.).
>70% of participants were CEOs, CFOs or VPs of Finance at their company.
PARTNERS
SURVEY PARTICIPANTS
DISTRIBUTION BY ARR DISTRIBUTION BY JOB FUNCTION
47%
31%
21% 24%
17%
14%
13%
7% 6% 6%
3% 5% 4%
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M Founder/ CFO/VP COO/VP CRO/VP CMO/VP Other
CEO Finance Ops Sales Mkg
DISTRIBUTION BY SOFTWARE CATEGORY DISTRIBUTION BY CUSTOMER SIZE

42% 39%
38%
30%
22%
12% 8%
8%
Horizontal Vertical Infrastructure Other Enterprise Midmarket SMB Very small

app app (>1,000 ee) (101-1,000 ee) (20-100 ee) (<20 ee)
Source: 2017 OpenView SaaS Metrics Survey, N=300

EXECUTIVE SUMMARY:
KEY METRICS AT EACH
STAGE OF GROWTH
WE BENCHMARKED COMPANY PERFORMANCE
ACROSS A NUMBER OF KPIS
SIZE AND GROWTH
Employees Number of full-time equivalent employees at the end of 2016.
Funding Amount of equity capital raised to date.
YoY growth Change in annual recurring revenue at the end of 2016 vs. the end of 2015.
FINANCIAL
Sales & Marketing spend Spending on Sales & Marketing, including headcount, as a % of year-end 2016 ARR.
R&D spend Spending on R&D, including headcount, as a % of year-end 2016 ARR.
Monthly burn Net burn rate on a monthly basis at the end of 2016 (i.e. total amount of $ lost each month).
SAAS METRICS
CAC payback Months of subscription gross margin to recover the fully loaded cost of acquiring a customer.
Sales efficiency Incremental revenue contribution returned by Sales & Marketing spend.
Logo retention Annual logo retention seen in cohorts.
Net dollar retention Annual net dollar retention (after upsells & expansion) seen in cohorts.
DIVERSITY
Women in leadership % of female representation among employees Director-level and above.
HOW TO READ THE FOLLOWING SLIDES
Columns represent responses

from companies at varying levels
of ARR, from <$1M to >$60M.
Rows represent common KPIs,

such as size, funding, growth,
retention and burn.
Each cell represents the median

performance for a given metric
(p7) or performance that would
put a company in the top
quartile (p8) for that metric
within their ARR level.*
*Very few companies are top quartile in all

metrics. For instance, the fastest growing
companies rarely have the low monthly burn.
METRICS BY COMPANY ARR (MEDIAN)
COMPANY ARR
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
SIZE AND GROWTH
Employees 10 27 32 55 100 182 467
Funding $2.5M $2.5M $2.5M $15M $20M $37.5M >$50M
YoY growth 200% 100% 68% 40% 45% 38% 22%
FINANCIAL
Sales & Marketing spend 30% 35% 50% 40% 40% 49% 30%
R&D spend 70% 50% 40% 49% 32% 22% 22%
Monthly burn $15,000 $50,000 $30,000 $75,000 $550 $0 $0
SAAS METRICS
CAC payback - 8 months 9 months 9 months 13 months 10 months 12 months
Sales efficiency - 1.0 0.7 0.6 0.5 0.3 0.3
Logo retention 90% 90% 88% 87% 84% 85% 90%
Net dollar retention 100% 104% 103% 90% 93% 99% 96%
DIVERSITY
Women in leadership 10% 20% 20% 25% 21% 27% 20%
METRICS BY COMPANY ARR (1ST QUARTILE*)
COMPANY ARR
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
SIZE AND GROWTH
Employees 16 35 54 65 155 295 550
Funding $2.5M $10M $10M $25M $37.5M >$50M >$50M
YoY growth 405% 209% 188% 58% 80% 71% 40%
FINANCIAL
Sales & Marketing spend 20% 25% 30% 30% 25% 13% 11%
R&D spend 40% 33% 25% 35% 20% 19% 11%
Monthly burn $0 $0 $0 $0 -$15,000 -$25,000 -$50,000
SAAS METRICS
CAC payback - 4 months 6 months 6 months 4 months 3 months 9 months
Sales efficiency - 1.4 1.1 0.8 1.1 0.9 0.4
Logo retention 100% 96% 95% 90% 93% 90% 92%
Net dollar retention 110% 110% 110% 101% 105% 115% 99%
DIVERSITY
Women in leadership 25% 29% 28% 45% 30% 37% 29%
Source: 2017 OpenView SaaS Metrics Survey, N=300 *Very few companies are top quartile in all metrics. For instance,
Proprietary and Confidential 2017 OpenView Investments, LLC. All Rights Reserved the fastest growing companies rarely have the low monthly burn. 8
IN-DEPTH INSIGHTS:
GO-TO-MARKET
GROWTH RATE BY COMPANY ARR
INSIGHTS
YoY Growth 1st Quartile 3rd Quartile Median
400%
350% Its common for startups

to grow rapidly, doubling
300% or tripling in size year
over year, until they hit
250% $5M in ARR.
200% After $5M in ARR, the

median growth rate
150% slows to 50%.
100%
50%
0%
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
ARR
HOW GROWTH ADDS UP
ARR (in $ millions)
25% CAGR 35% CAGR 50% CAGR 75% CAGR 100% CAGR
$100
At a common 35% CAGR, it
would take 10 years for a SaaS
$80 company to grow from $5 to
$100M in ARR.
$60 If a company were to maintain

an aggressive 75% CAGR, it
would take just over 5 years to
$40 hit that coveted milestone.
Slack, the fastest growing SaaS
company to our knowledge,
$20 reached $100M in ARR in only
2.5 years.
$0
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14
Number of Years
MEDIAN SALES & MKTG. SPEND
Sales & Mktg. Spend
(% of ARR)
1st Quartile 3rd Quartile Median
80%
Spend peaks during the

expansion stage when
60% companies rapidly build out
their sales & lead gen teams.
40%
20%
0%
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
ARR
SALES & MKTG. SPEND BY SALES CHANNEL
Sales & Mktg. Spend
(% of ARR)
60%
50%
40%
30%
20%
Companies selling through
10% self-service, such as
Expensify and Slack, have
0% the potential to grow far
No touch / self- Inside sales Field sales Mixed sales more efficiently than others.
service
Dominant Sales Channel
SALES CHANNEL MIX VS. CUSTOMER SIZE
Sales Channel Mix
INSIGHTS
No touch/self-service Inside sales Field sales Indirect/channel
100%
7% 7% 12%
16% Those selling to small
80% 30% businesses rely more on
lower cost sales channels
45% like self-service and
60% inside sales.
42%
Those selling into the
40% Enterprise generate most
53%
of their ARR through field
36% sales, with some inside
20% 35% and channel sales.
10% 8%
0%
VSB/SMB Midmarket Enterprise
customers customers customers
Source: 2017 OpenView SaaS Metrics Survey, N=300 Target Customer Size
SALES CHANNEL MIX VS. GROWTH
Avg. Sales Channel Mix (Distribution of ARR by Channel)
INSIGHTS
No touch/self-service Inside sales Field sales Indirect/channel
100%
9% 9% 8%
Fast growers are far
80% 26% more likely to leverage
30%
43% inside sales, which offers
a compelling balance on
60% attractive deal sizes and
high deal velocity.
40% 45% 51% While Slacks touchless
29% sales model generates a
lot of buzz, few
20%
companies have been
19% 16% 16% able to replicate their
0% success.
Slow growth Medium growth Faster growth
(<30% YoY) (30-100% YoY) (>=100% YoY)
Source: 2017 OpenView SaaS Metrics Survey, N=300 Growth Relative to ARR
ARR FROM INBOUND VS. OUTBOUND MKTG.
ARR Contribution
by Source Inbound Outbound
100% When selling into the Enterprise,
companies shift to more
27% expensive marketing tactics like
80% BDR/SDR teams and conferences.
50%
60%
60%
40%
73%
50%
20% 40%
0%
VSB/SMB Midmarket Enterprise
customers customers customers
Source: 2017 OpenView SaaS Metrics Survey, N=300 Target Customer Size
SALES EFFICIENCY (MAGIC NUMBER)
Sales
Efficiency* INSIGHTS
1.50
1.25 Sales efficiency the

magic number shows
the revenue contribution
1.00 from every dollar spent
on sales & marketing.
0.75 On average, sales
efficiency is about 0.7.
0.50
Companies grow far
more efficiently in their
0.25 early years, and sales
efficiency drops
dramatically as
0.00 companies hit saturation.
$1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
*Excluded companies <$1M ARR because they dont have enough data for predictable sales efficiency
ARR
MONTHS TO RECOVER CAC (CAC PAYBACK)
CAC Payback
in Months* INSIGHTS
20
Startups report a CAC
payback of 9-12 months
15 on average; however,
this is overly optimistic
12-18 months is more
common in our
10 experience when
factoring in gross
margins and fully loaded
acquisition costs.
5
Best-in-class companies
have a CAC payback of
6-12 months with rare
0
exceptions of <6 months.
$1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
*Excluded companies <$1M ARR because they dont have enough data for predictable CAC payback
ARR
IN-DEPTH INSIGHTS:
PRICING
ACV BY TARGET CUSTOMER SIZE
Target Customer Size
INSIGHTS
<$1k $1k-5k $5k-10k $10k-25k $25k-50k $50k-100k $100k-250k >$250k
VSB* customers 47% 32% 16% 5%

Theres a strong
correlation between
target customer size and
SMB customers 11% 46% 13% 13% 10% 6% ACV.
Take a close look at your

ACV and target market,
and see whether youre
Midmarket customers 10% 15% 32% 26% 7% 7% on track to build a large
and enduring business
(pro tip: stop selling
Enterprise deals for
Enterprise customers 15% 16% 26% 23% 13% <$25k).
0% 20% 40% 60% 80% 100%

*VSB = very small business
Source: 2017 OpenView SaaS Metrics Survey, N=300 ACV Distribution
WAYS TO GROW A $100M ARR BUSINESS
Target Addressable Potential ACV required

customer size companies (US) share to hit $100M
Very small
4M companies 10% share $250/year
businesses
SMB 1M companies 10% share $1,000/year
If youre targeting the

Midmarket 100k companies 10% share $10,000/year Midmarket or Enterprise,
youll find it nearly
impossible to reach
$100M+ in ARR with a
Enterprise 40k companies 10% share $25,000/year low ACV.
Source: US Bureau of Labor Statistics Data

ACV BY DOMINANT SALES CHANNEL
<$5k $5-25k $25-100k >$100k
These companies
No touch / self-service 68% 15% 12% 5% employ a bottoms-up
sales model to efficiently
sell larger deals.
Inside sales 23% 40% 30% 7%
Field sales 25% 41% 34%
Channel 15% 38% 31% 15%
Mixed 33% 20% 47%
0% 20% 40% 60% 80% 100%

*Dominant sales channel accounts for >50% of ARR
ACV BY TYPE OF SOFTWARE
Software Category
<$5k $5-25k $25-100k >$100k
Horizontal app 32% 30% 28% 9%
Vertical app 18% 34% 30% 19%
Infrastructure software
Infrastructure 16% 32% 26% 26% companies achieve the
highest ACV levels.
0% 20% 40% 60% 80% 100%

MAIN PRICING METRIC
Distribution of
Respondents INSIGHTS
Other, 19%
User or seat-based
Total pricing is still the most
employees, common pricing metric.
6%
If you havent already, its
User or seat-based,
worth evaluating
42% whether usage-based
pricing will help grow
Usage-based, 33% faster. It has a better shot
of reflecting the value
delivered and enables a
land-and-expand
business model.
Source: 2017 OpenView SaaS Metrics Survey, N=300 *Other includes e.g. feature-based pricing, flat fees
MAIN PRICING METRIC BY TYPE OF SOFTWARE
Software Category
INSIGHTS
User or seat-based Usage-based Total employees Other
Horizontal app 54% 24% 18%

Horizontal applications
still keep to the course of
user-based pricing
paved by Salesforce and
Slack.
Vertical app 30% 41% 11% 19%
Theres far more
openness to newer
pricing models within
vertical applications and
infrastructure, led by the
Infrastructure 32% 39% 6% 23%
success of AWS and
Twilio.
0% 20% 40% 60% 80% 100%

*Other includes e.g. feature-based pricing, flat fees
Pricing Metric
IN-DEPTH INSIGHTS:
FINANCIAL
MEDIAN EQUITY CAPITAL RAISED ($M)
Median Equity Capital Raised ($M)
$70
$60
//
$50
$40
$30
While the median capital is
$20 the same from $1-5M ARR,
theres a wide gap between
top performers ($10M+ in
$10 funding) compared to
average ones.
$0
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
ARR
CAPITAL RAISED BY ARR
ARR
<$5M funding $5-15M $15-25M $25-50M >$50M
$1-2.5M ARR 68% 20% 7% Heres what your peers

have raised how do
you stack up?
$2.5-5M ARR 55% 31% 7% 5% The hottest startups are still
achieving substantial funding
given their revenue, although
these are limited to a select
$5-10M ARR 25% 25% 25% 19% 6% few companies.
$10-20M ARR 32% 21% 32% 11%
$20-60M ARR 8% 17% 42% 33%
0% 20% 40% 60% 80% 100%

Equity Capital Raised ($M)
GROSS PROFIT MARGIN ON SUBSCRIPTIONS
Gross Margin (GM) on Subscription Revenue
INSIGHTS
>=90% GM, <50% GM,
14% 17%
Best-in-class software
companies have
50-59% GM, subscription gross
6% margins above 80%.
60-69% GM, companies see slightly
8% lower gross margins, on
80-89% GM, average, compared to
application software.
33%
Gross margin % remains
consistent regardless of
company ARR.
70-79% GM,
23%

LOGO RETENTION RATES (ANNUAL)
Logo Retention Rates (Annual)
65-74% INSIGHTS
<65% retention, 4% retention, 8%
Top tier companies see

75-84% logo retention rates of at
>=95% least 85%.
retention, 28% retention, 24%
Benchmark retention
should differ depending
on the target customer
and ACV, with much
lower retention among
companies selling deals
85-94% <$5k per year.
retention, 35%
Source: 2017 OpenView SaaS Metrics Survey, N=300 *Excluded companies with <$1M in ARR
NET DOLLAR RETENTION RATES
Net Dollar Retention Rates (Annual)
>=125%, 14% <75%, 8%
75-84%, 8%
115-124%, 5%
companies and those
with usage-based pricing
are the most likely to see
net retention rates of
85-94%, 20%
115% and higher.
105-114%,
22%
95-104%, 24%
Source: 2017 OpenView SaaS Metrics Survey, N=300 *Excluded companies with <$1M in ARR
RETENTION RATES VS. GROWTH
Retention Rates
120% Avg logo retention Avg net $ retention
109% The ability to retain and

110% expand new customers
facilitates rapid growth.
100% 97%
90%
89%
90%
84%
82%
80%
70%
//
60%
Slower growth Medium growth Faster growth
(<30% YoY) (30-100% YoY) (>=100% YoY)
Source: 2017 OpenView SaaS Metrics Survey, N=300 Annual Growth Rate
THE RULE OF 40%
FCF Margin (Loss)
INSIGHTS
40%
20%
Companies that perform
best in public markets
0% balance growth and
-20% 0% 20% 40% 60% 80% 100% 120% 140% profitability. KeyBanc
-20% Capital Markets data
shows that 79% of the
market cap of public
-40% SaaS was above the
40% threshold.
-60% Most private companies
still trend below the Rule
-80% of 40 and must improve
to make attractive IPO
candidates.
-100%
Annual Growth Rate
Source: 2017 OpenView SaaS Metrics Survey, N=300; Excluded companies <$5M in ARR
IN-DEPTH INSIGHTS:
TALENT
NUMBER OF EMPLOYEES (FTES)
Number of FTEs

300
250
200
150
100
Theres an especially wide
variation in employee
50
count once companies hit
$10M in ARR.
0
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M
ARR
FTE MIX BY FUNCTION
ARR
INSIGHTS
Engineering Product Sales CS Marketing Other
<$1M ARR 41% 15% 18% 11% 10% 6%
At the early stages, most

$1-2.5M ARR 36% 10% 17% 16% 9% 11% startup employees are in
Product & Engineering
roles.
$2.5-5M ARR 33% 10% 19% 17% 9% 12%
As companies expand,
they need to rapidly
$5-10M ARR 27% 12% 20% 15% 10% 16% grow Customer Success
and specialized
functions, such as
$10-20M ARR 27% 10% 22% 16% 8% 17% Recruiting and Finance.
$20-60M ARR 26% 11% 20% 20% 9% 13%
0% 20% 40% 60% 80% 100%

FTE Mix by Function
FTE MIX BY DOMINANT SALES CHANNEL
Engineering Product Sales CS Marketing Other
Companies with self-
No touch / self-service 44% 11% 12% 12% 11% 9% service sales models
require far fewer Sales &
Customer Success
Inside sales 33% 10% 21% 17% 8% 11% resources to grow,
enabling them to scale
very efficiently.
Field sales 34% 13% 19% 16% 7% 11%
Channel 34% 18% 9% 17% 9% 13%
Mixed 27% 12% 22% 11% 12% 17%
0% 20% 40% 60% 80% 100%

FTE Mix by Function
GENDER EQUALITY
Percent of Respondents
100% Company leadership (Director & above) Board of Directors
80% A whopping 71% of SaaS

71%
startups have no female
Board members. How is
60% this acceptable?
40%
28% 26%
20% 15% 13%

10% 12% Only 12% have full parity
5% 4% 6% 4% between men and women
3% 1% 3%
0% within their leadership
teams.
0% 1-9% 10-19% 20-29% 30-39% 40-49% 50%+
female female female female female female female
Source: 2017 OpenView SaaS Metrics Survey, N=300 Female Representation

GENDER EQUALITY BY COMPANY ARR
Mean Percent Female
INSIGHTS
100% Company leadership (Director & above) Board of Directors
Larger companies tend

80% to fare slightly better
when it comes to gender
diversity.
60%
Even so, the software
industry as a whole still
40% has a ways to go to get
28% 29% to true parity.
24%
19% 20% 21%
18% 16%
20% 13%
10% 8% 9% 7% 5%
0%
<$1M $1-2.5M $2.5-5M $5-10M $10-20M $20-60M >$60M
Source: 2017 OpenView SaaS Metrics Survey, N=300 ARR

QUESTIONS OR
COMMENTS?
KYLE
POYAR
Director of Market Strategy
[email protected]
Kyle helps OpenViews portfolio companies accelerate

top-line growth through deep insights into their market
landscape and customers. He leads segmentation,
positioning, channel/partner strategy, new market entry
and packaging/pricing initiatives, partnering closely with
portfolio leadership teams. He also covers OpenViews
SaaS metrics and benchmarking research.
WE HELP EXPANSION STAGE SOFTWARE
COMPANIES ACQUIRE, RETAIN AND
GROW THE RIGHT CUSTOMERS AND
TALENT.
OPENVIEWPARTNERS.COM
THANK YOU!

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EXPANSION SAAS

Kyle Poyar September 2017

DISTRIBUTION BY SOFTWARE CATEGORY DISTRIBUTION BY CUSTOMER SIZE

Horizontal Vertical Infrastructure Other Enterprise Midmarket SMB Very small

Source: 2017 OpenView SaaS Metrics Survey, N=300

Columns represent responses

Rows represent common KPIs,

Each cell represents the median

*Very few companies are top quartile in all

350% Its common for startups

200% After $5M in ARR, the

$60 If a company were to maintain

Spend peaks during the

1.25 Sales efficiency the

VSB* customers 47% 32% 16% 5%

Take a close look at your

0% 20% 40% 60% 80% 100%

Target Addressable Potential ACV required

SMB 1M companies 10% share $1,000/year

If youre targeting the

Source: US Bureau of Labor Statistics Data

Field sales 25% 41% 34%

Channel 15% 38% 31% 15%

Mixed 33% 20% 47%

0% 20% 40% 60% 80% 100%

Horizontal app 32% 30% 28% 9%

Vertical app 18% 34% 30% 19%

0% 20% 40% 60% 80% 100%

Source: 2017 OpenView SaaS Metrics Survey, N=300 ACV Distribution

Horizontal app 54% 24% 18%

0% 20% 40% 60% 80% 100%

$1-2.5M ARR 68% 20% 7% Heres what your peers

$10-20M ARR 32% 21% 32% 11%

$20-60M ARR 8% 17% 42% 33%

0% 20% 40% 60% 80% 100%

Source: 2017 OpenView SaaS Metrics Survey, N=300

Top tier companies see

109% The ability to retain and

1st Quartile 3rd Quartile Median

<$1M ARR 41% 15% 18% 11% 10% 6%

At the early stages, most

$20-60M ARR 26% 11% 20% 20% 9% 13%

0% 20% 40% 60% 80% 100%

Channel 34% 18% 9% 17% 9% 13%

Mixed 27% 12% 22% 11% 12% 17%

0% 20% 40% 60% 80% 100%

100% Company leadership (Director & above) Board of Directors

80% A whopping 71% of SaaS

20% 15% 13%

Source: 2017 OpenView SaaS Metrics Survey, N=300 Female Representation

Larger companies tend

Source: 2017 OpenView SaaS Metrics Survey, N=300 ARR

Kyle helps OpenViews portfolio companies accelerate

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