Presented by Sage Intaact
This year’s annual private SaaS company survey from KeyBanc Capital Markets focused on the essential post-COVID questions that CFOs, RevOps, and finance leaders need to know to make data-informed business decisions. See where you stand when you join this VB Live event.
Every year, the KeyBanc Capital Markets annual private SaaS company survey takes the lid off to reveal the underlying performance metrics that are critical to finance leaders and investors for making investment decisions, strategic business decisions, and managing operations. This year it’s particularly important, says David Spitz, managing director at KeyBanc Capital Markets, because so much has changed in the wake of COVID-19. The impact of those changes, some temporary, some permanent, are reverberating.
“We took a focused approach this year to try to shine a light on specifically what is going on in the COVID environment,” Spitz says. “In the current time frame, people don’t have a good gauge of what’s going on.”
The survey, conducted in the middle of June questioned more than 500 SaaS companies about their year-to-date results as of May, including their revenue growth, ARR growth, and their thoughts on what’s coming for the next year.
About 300 of those companies are over $5 million in annual recurring revenue (ARR), with the median of those 300 companies just under $20 million. About 50 companies were north of $50 million. They questioned a mix of venture-backed companies as well as sponsored or private equity-backed companies, and quite a few bootstrapped businesses. About two-thirds of those companies are U.S.-based, and more than 170 companies were outside the U.S.
This year, the big takeaway is that performance has borne the brunt of the virus’s repercussions: growth expectations on average were cut in half, on average, as of May. Pre-pandemic, growth expectations going into 2020 on average were about 40% year-over-year. Those have been reduced to 20% for the average company.
But as Spitz say, “It’s half of where they were, so I suppose they’re disappointed, but if you can grow like that in this environment, that’s a clear bright spot. I think that’s the takeaway.” And with this kind of data provided by the survey, you’re better able to step back, communicate with your board and investors, and make rationale decisions moving forward.
Most of the change, through the first five months of the year, was related to simply not being able to sell as much — because of elongated sales cycles, lower close rates, and reduced sales pipeline. To their surprise, explains Sptiz, the churn effect is not as significant as you’d might expect. But that might be because you often have to wait for a renewal date before customers change their subscription.
The median churn rate before the pandemic for companies of some size was about 12.5%. That had ticked up from 12.5% to about 14% on an annualized basis through May. New bookings have been affected a fair amount, still growing, but not growing nearly as fast as last year.
It cascades from there. Customer acquisition cost, or what it costs a company in terms of total sales and marketing expenses to acquire a new dollar of ARR, a new dollar of subscription or SAS revenues, have also ticked up a lot this year, meaning companies have become a lot less efficient.
“One thing you can do, of course, if you’re not selling as much, you can let go of some of your sales capacity,” Spitz says. “About 40% of the survey group did some reduction in force, but a lot of companies are saying, well, things will return.”
Investors are looking for what Spitz refers to as the “COVID Elite” — companies like Zoom, DevOps companies, companies that enable ecommerce and virtual work, and online education firms, for example. They’re the companies that didn’t reduce their growth estimates in half, but actually moved their estimates up, growing close to 30% on average, or more, just in the first few months after the pandemic broke.
“But you don’t have to be the COVID Elite to attract investors — what you do need is to be able to map yourself relative to these benchmarks with some degree of certainty,” he says. “You can answer the question, how is COVID affecting your business? It doesn’t necessarily need to be a tail wind, but this isn’t just anecdotal information.”
See where you stand when you join this VB Live event. Industry experts will take a deep dive into the KeyBanc Capital Markets survey, and share the metrics you need to compare against, and the most important process improvements you can make to guide your cash flow, revenue, billing, and forecasting.
Don’t miss out!
You’ll learn about:
- COVID benchmarks on ARR, churn, CAC, and capital efficiency
- How to gauge relative success in terms of growth and cash flow profitability
- Comparisons across funding stages, go-to-market models, type of product and primary buyer
- Operational adjustments companies are making in the wake of the changing environment
- David Spitz, Managing Director, KeyBanc Capital Markets
- David Appel, Head SaaS Vertical, Sage Intacct
- Stewart Rogers, Analyst-at-Large, VentureBeat