YOY Revenue Growth Benchmarks for SaaS Companies
To determine revenue growth benchmarks for Series B and C SaaS companies for comparison purposes.
Preliminary research shows that there are varying opinions on revenue benchmarks for SaaS companies in Series B or Series C funding.
- According to OpenView Partners the following are 2018 SaaS benchmarks for ARR, YoY growth, and number of employees:
- Angel/Seed: $0.5 million ARR, 100% YoY growth, and 10 employees.
- Series A: $3.8 million ARR, 80% YoY growth, and 38 employees.
- Series B: $7.5 million ARR, 126% YoY growth, and 67 employees.
- Series C: $12.5 million ARR, 81% YoY growth, and 115 employees.
- Series D or Later: $25.0 million ARR, 60% YoY growth, and 195 employees.
- SaaS companies that receive venture capital investments reach the $1 million mark in annual recurring revenue (ARR) in four years, with bootstrapped companies reaching that milestone in seven years. "The median age of companies with $1 million in ARR is 6 years."
- Bootstrapped SaaS companies grow at 28% per year compared to SaaS companies that received angel funding, which grow at 43% per year and SaaS companies that receive venture capital funds, which grow at 50% per year.
- SaaS companies that target a "horizontal market are growing faster than companies attacking a vertical industry: 40% growth versus 35% respectively."
- SaaS companies that require advanced yearly billing grow faster (40%) than those that only require advanced monthly billing (36%).
- For SaaS companies raising Series A funding, the average ARR is $1.9 million.
- The average ARR benchmark for Series B SaaS companies is $5 million.
- Series B SaaS companies should be seeing a 2.5-3x ARR growth YoY.
- If a software company only grows at 20% per year, there is a 92% chance it will cease to exist in the next few years.
- Even at a growth rate of 60% YoY, "its chance of becoming a multibillion dollar giant are no better than 50/50."
- After reaching the $10 million ARR, the median growth rate for SaaS companies slows to slightly under 50%.
- Growing at a CAGR of 35%, it would take an SaaS company 10 years to grow from $5 million ARR to $100 million ARR.
- However, if an SaaS company can maintain a 75% CAGR, it would take just five years to grow from $5 million ARR to $100 million ARR.
- The fastest growing SaaS companies generate $3.90 in revenue for every $1.00 lost to revenue churn.
- Above average SaaS companies achieve a 5% to 7% annual revenue churn, which is the equivalent of a loss of $1.00 out of every $200.00 per month.
- Top SaaS companies achieve a negative revenue churn rate and have a revenue retention rate of 100%.
- Smaller, private SaaS companies with less than $10 million in revenue have a median annual churn rate of 20%.
- The median annual churn rate for all SaaS companies is 10%.
- SaaS companies that spend more on sales and marketing as a percentage of revenue generally grow faster than companies that spend less.
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