pacific crest survey analysis v2
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Confidential © 2013 Amity
AnalysisSelected Slides from the Survey
Download the Survey
Pacific Crest, along with David Skok of Matrix Partners, has been conducting annual surveys of private SaaS companies since 2010. Pacific Crest is an investment banking firm with a strong focus on SaaS. David Skok is a highly respected authority in the SaaS industry.
Paul Philp, CEO and Founder, [email protected]
Confidential © 2013 Amity
Pacific Crest Survey Analysis
Industry Growth
Acquisition Channels
ACV: New customers vs. renewals vs. upsells
Trial-based ACV
Commissions
Average Deal Size
Contract sizes and billing cycles
Pricing Metrics
Churn
Confidential © 2013 Amity
The SaaS Industry’s Growth is AcceleratingDriven by broad adoption of the cloud, and mobile.
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Use of Low Cost Acquisition Channel is Accelerating‘Land and expand’ and organic growth gaining momentum.
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Low Cost Channels are ExpandingThe SaaS model is bifurcating into high cost and low cost strategies.
67%
13%
65%
29%
6%
38%
54%
8%
25%
75%
100%
2011 2013 2011 2013 2011 2013 2011 2013 2011 2013
Confidential © 2013 Amity
New Customer Revenue is ExpensiveUpselling or renewing takes a fraction of the cost.
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Renewing Revenue is Highly ProfitableLeveraging existing customer base the key to profitability.
Remember:$1.00 upsell ACV costs $0.17.$1.00 new customer ACV costs $0.92.
If a company is getting 25% of new ACV thru upsells, then for $1MM new ACV:$250,000 costs $42,500; $750,000 costs$690,000.
ROI: 588% vs 109%.
Average excluding smallest companies: 20%
Confidential © 2013 Amity
Fast Growth SaaS Leverages the Customer BaseFaster growth at a lower cost.
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Trials Generate One Third of All New ACV1/4 to 2/3 of respondents use trials of some sort.
In 2011, trials accounted for ~19% of new ACV.
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Renewal Commissions now Standard PracticeRecognizing the profitability of renewals and upsells.
2012: 50%
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Average Deal Size is Getting SmallerConsistent with the shift to lower-cost CAC.
2011 Median: $37.5K2012 Median: $24K
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Customer cash flow is at increased risk.Average billing period has dropped significantly since 2012.
2012: Average Billing Period was one year.
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2/3 of Revenue is Consumption-basedAt risk.
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Revenue Churn Has Almost DoubledConsistent with lower-cost acquisition, smaller deal size and consumption-based pricing.
2011 Median: 5%2012 Median: 5%
It is interesting that only 66 out of 94 possible respondents answered this question.
Could it be the rest don’t know their churn rate?
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Lower Cost Channels have Higher ChurnThe industry is moving to lower-cost channels, so churn is rising across the industry.
We suspect that ‘Internet Sales’ is even higher – there were only 5 responses.
Confidential © 2013 Amity
What the Data Tells UsThe SaaS model continues to evolve.
SaaS growth is accelerating Driven by adoption of the cloud, and mobile.90% growth rate by internet distributors.
Use of low cost acquisition is accelerating
Model is splitting into high- and low-cost strategies.
Trials generate one third of new ACV 1/4 to 2/3 of respondents use trials.
Average Deal Size is getting smaller SMB and VSB fastest growing segments.
Leveraging customer base is key to profitability and growth Renewing revenue is highly profitable.
On average, companies are realizing 20% of new ACV from upsells.
The fastest-growing companies are significantly higher: up to 35%.
Renewal commissions now standard 50% paid in 2012, increased to 76% in 2013.
Revenue churn has almost doubled Lower cost channels have higher churn.
Customer cash flow is at increased riskBilling period has dropped from one year in
2012 to 3 months in 2013.2/3 of revenue is consumption-based.
Confidential © 2013 Amity
Conclusions
SaaS 1.0: EnterpriseComplex, top-down, cost-
focused.
SaaS 2.0: PersonalAccessible, engaged,
organic.Economic
drivers Empowered customers Empowered users
Business strategy Management platforms Land, expand and organic
growthValue
proposition Reduce costs Collaborate and engage
Customer acquisition Complex contracts Easy to try, easy to buy
Customer relationship
Break/fix: high complexity, low engagement
Low complexity, high engagement
Customer development Contract-based, negotiated Continuous and organic
Business application
stackSiloed Product and business
alignment
We are witnessing an industry transformation:
Confidential © 2013 Amity
1. Generate Product Qualified Leads:Lower barriers to evaluation and adoption.
2. Use Inbound Marketing and Inside Sales:Focus on lower cost customer acquisition methods.
3. Align Product and Business: Horizontal layers over Departmental silos.
4. Focus on Personal Customer Success:High-engagement, personal service builds trust.
5. Scale Customer Engagement:Enable employee-to-people engagement throughout the customer journey.
Easy to try, easy to buy, easy to engage.Competing in the Next SaaS Wave
helps SaaS companies keep and grow their customers by:
Removing time-wasting complexity from the customer success process, and
Enabling customer-facing teams to spend more time engaging customers.
provides the only scalable customer engagement platform purpose-built for SaaS.
Customer Success. Simplified.
Confidential © 2013 Amity
