With so much, cash on hand, SaaS businesses do not appear to be concerned about how much runway they have left. Only 13% of the approximately 600 organizations questioned in OpenView’s annual Financial & Operating Benchmarks study cited “burning too much cash” as one of their top three worries, down from 30% last year. While the year 2020 was unusual, and a comeback this year is not surprising, the research goes even farther, claiming that the gap between the haves and have-nots of B2B software is widening.
The authors suggest that this is most evident when looking at public B2B SaaS enterprises. They bring out statistics suggesting that certain businesses’ enterprise value increases more quickly than the competition in a study accompanying the new report. According to the authors of the research, the combination of a large market, a compelling growth engine, and excellent unit economics are enabling top startups acquiring talent and funding, which is increasingly eluding lower-performing businesses.
However, what does this mean for founders who are not currently on the verge of an IPO? What benchmarks may they use to measure their progress? We asked the report’s two principal co-authors, OpenView Vice President Sean Fanning and Operating Partner Kyle Poyar, for further information.
We also reached out to Dale Chang, an operating partner at Scale Venture Partners, which uses its Scale Studio to gather data, and Matt Cohen, a partner at Ripple Ventures in Canada. Our discussion included some of the tactics SaaS businesses might use to replicate their top competitors, such as product-led development and usage-based pricing, both of which OpenView promotes, as well as a lingering concern: Are the multiples we are witnessing sustainable?
The benchmarking table below, which covers a few metrics and differentiates them depending on the respondents’ annual recurring revenue (ARR), is the chart we would keep if we had to keep only one from OpenView’s report:
“Each cell shows the median performance of a firm, as well as the range (lowest quartile and top quartile) of each measure at each corresponding ARR scale,” according to a notice to readers, with the median in bold and the range in parenthesis. “Benchmarks represent the map, not the territory,” the authors write, and “performance and valuation constitute a multivariate equation.” Still, a founder of a firm with an annual revenue range of $1 million to $2.5 million would be happy to learn that expanding 100 percent year over year implies exceeding the average SaaS company in that category. They, however, point out that top-of-the-line businesses expand by around 300 percent.
