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New Data on SaaS Company Growth Rates and Retention

April 28, 2016

Two of the focus areas of SaaS Capital’s fifth annual SaaS benchmarking survey were growth and retention.

Data from this survey was used to generate an update to one of our most popular Research Briefs – How Fast Should My SaaS Company be Growing?

A key takeaway from our research was the relationship between retention rate and a company’s ability to grow top-line revenue. The chart below highlights this connection.

SaaS_Company_Growth_Rates_and_Retention_Obs

The data points highlighted in green and the trend line derived from them appear to represent ‘best of breed’ companies for a given retention rate.  With the exception of one outlier, the trend line demonstrates how churn is a natural governor on growth, and that high growth and high churn are mutually exclusive. We also see the obvious compounding effects higher retention has on growth over time – the so-called ‘flywheel’, and we know from research on how retention impacts valuation that this relationship is directly causal and not simply correlated.

For more on the connections between growth rate and retention, company size, funding type, and (for the first year) customer vertical segment, download the full report here — How Fast Should My SaaS Company be Growing. Also, if you’d like to receive our future research as it’s released, you can subscribe at the top right of the page.

Rob Belcher

Rob Belcher

Managing Director, SaaS Capital™

SaaS Capital™ pioneered alternative lending to SaaS. Since 2007 we have spoken to thousands of companies, reviewed hundreds of financials, and funded 60+ companies. We can make quick decisions. The typical time from first “hello” to funding is just 5 weeks. Learn more about our philosophy.

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