Bessemer’s 2017 State of the Cloud Report

There was so much good content at the SaaStr Annual that it’s going to time to get through it all. Next of the list is Bessemer’s 2017 State of the Cloud Report.

Here are a few notes from the Bessemer slide deck:

  • 40% of the market cap of publicly traded SaaS companies has already been acquired representing greater than $300 billion in value
  • Key questions from top CEOs:
    • How fast should I be growing?
    • How much should I burn?
    • How do I scale?
  • How fast should I be growing?
    • Dropbox is the fastest SaaS company ever to hit $1B in run rate (did it in eight years)
    • The pace is quickening for SaaS companies going from $1M – $100M in recurring revenue (5.3 years for top 25%, 7.3 years median, 10.6 years bottom 25%)
    • BVP Growth Benchmark for ARR
      • Good
        • $1 – $10M in four years
        • $1 – $100M in 10 years
      • Better
        • $1 – $10M in three years
        • $1 – $100M in 7 years
      • Best
        • $1 – $10M in two years
        • $1 – $100M in five years
  • How much should I burn?
    • Rule of 40 = % Annual Revenue Growth + % Profit Margins
    • Efficiency Score = % Annual CARR Growth + % Burn
    • BVP Efficiency Rule (> $30M ARR)
      • Expansion ($30 – $60M ARR) – 70% efficiency score
      • IPO (~$100M ARR) – 50% efficiency score
      • Public (>$150M ARR) – 30% efficiency score
    • BVP Efficiency Rule (< $30M ARR)
      • Net New ARR / Net Cash Burn > 1
      • Meaning, for every dollar burned, company needs $1 or more net new dollars of ARR
  • How do I scale?
    • Customer Acquisition Cost (CAC) Payback = Total Sales and Marketing Costs Last Quarter / New CMRR Added Last Quarter * % Gross Margin
    • Understanding Your Sales Model
      • SMB
        • CAC Payback 3-6 months
        • AVG ACV < $12k
        • Churn/Upsell < 3% monthly
      • Midmarket
        • CAC Payback 12 months
        • AVG ACV $12 – $50k
        • Churn/Upsell 1% monthly
      • Enterprise
        • CAC Payback 3-6 months
        • AVG ACV $50k+
        • Churn/Upsell < 1% monthly, upsell

Thanks to the team at Bessemer for putting together the great information. Every SaaS entrepreneur should read Bessemer’s 2017 State of the Cloud Report.

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