A little over two years ago I wrote a blog piece on Early Stage SaaS Unit Economics which outlines LTV/CAC for enterprise software businesses. While heavy on math, the post lacked foresight because I now believe LTV/CAC calculations are of waning importance in SaaS. It is clear to the SaaS community that the future of selling software is bottoms-up. Great examples of this today are Twilio, Shopify, Dropbox, Zoom, Slack, Square and Atlassian. A confluence of factors led to this including rapid product development and deployment via AWS, and now simply an expectation of buyers to purchase software this way.

Due to the change in selling and retention motions inherent in these models, the market has come to believe that the best way to analyze these businesses is on a cohort gross margin payback basis and not LTV/CAC. …


Michael B. Gilroy

General Partner @ Coatue — U.C. Berkeley California Bear — SF Bay Area Native

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