How much do public SaaS companies charge their customers?

Contract sizes are one of the most important inputs into a SaaS company — the dollars that can be extracted per customer is critical to success. Is the annual price customers pay large enough to cover acquisition and operating costs? And then create a profit?

Many SaaS CEOs I speak with constantly have the debate whether to continue to build out their product suite to go up-market, or focus on their current core market. Smaller ASPs or ACVs ( i.e. <$10K) can be sold over the phone, or through a self-serve model often very quickly, while large ASPs ($100K+) are typically sold by field sales reps and entail much longer sales cycles. A business user paying with a credit card or going through legal and other procurement processes are very different. Does a SaaS company need to have high ASPs to be successful?

I looked at ~20 of the fastest growing public software companies and how much they sell their products for — implied subscription ARR over total customers. This is a great proxy for current ASPs. These companies also range in market cap from Salesforce at $50B, to AppFolio at ~$700M. As you can see from the chart below, the ASPs vary greatly. Veeva is a $5.6B market cap company with current ASPs of ~$1M, and Atlassian has a market cap of $6B, but only has a $6K ASP. The largest company in the group, Salesforce, is at $35K. The median of the group is $18K. Much lower than I would have expected for multi-billion dollar public software companies, all of which are growing 25%+ YoY.

Very large and enduring companies can be created with ASPs of <$10K as evidenced in the data above. Furthermore, there is little to no correlation between market cap and ASPs for these 21 companies. A great product and market opportunity are more important factors than how much a company charges. If a product is differentiated, delivers strong value, solves a pain point, and the market is sizable, a successful company can be built through continued execution.

Below is a table with each company’s last quarter ARR, total customers and implied ASPs for reference.

If you have any questions or would like to chat about any of this, drop me an email at aclayton@sparkcapital.com