Revenue growth is the most important metric for valuing a SaaS company, yet it’s hard to find good benchmarking data for a relevant peer group. Comparisons to multi-billion-dollar public companies are not helpful, and neither are the anecdotal data points from angel investors or VCs. To provide some better context on this question, we surveyed over 900 private SaaS companies regarding their 2017 revenue growth and published the data in a recent research brief.
Our analysis looked at the impact of venture capital funding, average contract value, and a few other key variables. Most importantly, we segmented growth rates based on the size of the company since a 100% growth rate for a start-up is a lot different than a 100% growth rate in a much larger business.
As you can see in the chart above, growth rates decline as revenue levels increase. This is simply due to math (a larger denominator) but boards and management teams need to use the data above to set informed growth plans and not simply base assumptions on prior year performance. It's also worth noting that overall growth in the SaaS industry is pervasive as 90% of the companies in our survey reported annual revenue growth of greater than 10%.
Other takeaways from our analysis included:
We hope that you find this information useful in running or valuing your SaaS business. To download the full analysis, please see - Benchmarking Private SaaS Company Growth Rates.
We will dive deeper into the points above in future publications. To be notified of new research, subscribe to our blog.
How Do SaaS Companies Perform in a Recession? - While predicting the start of the next recession is impossible, we know there will eventually be one. To enhance our understanding of the SaaS business model and better prepare ourselves and our portfolio companies for an eventual economic downturn, we wanted to learn how software-as-a-service companies performed through the previous recession... Click here to read the report.