SaaS IPO Benchmarking | Subscription Contract Sizes

What are the average subscription contract sizes for SaaS companies at IPO? I recently wrote a post analyzing how much ~20 public SaaS companies charge their customers and calculated their subscription ASPs (average selling price) or ACVs (annual contract value). To get those numbers, I looked at the last reported quarterly subscription revenue, multiplied by 4 to get an implied ARR figure (annual recurring revenue), then divided by the number of customers to get the average subscription contract size. Also note I isolated subscription revenue to leave out pro-serv, implementation and training revenue.

I took that same framework and applied it to 42 software/cloud companies to find their average ACV’s at IPO quarter— implied ARR over total customers. There is certainly wide disparity among the customer base within each of the companies, and while the average doesn’t tell the whole story, it’s directionally correct. For example, CRM and Twilio, with $13K and $8K averages respectively, had customers paying them in the millions per year at IPO, but had a long tail of smaller customers. Ideally, it would be nice to know subscription revenue distribution, but that data isn’t public. See the chart below for overall averages:

Implied ARR / # of Customers [IPO Quarter]

The median is $44K across this group, lower than I would have thought. 12 out of the 42 or roughly 30% charge less than $10K/year on average in subscription revenue. Do larger subscription ACVs tend to come from bigger companies? Not from this group at least — there’s no correlation between ARR scale and size of contracts. TEAM, the largest with regard to ARR at IPO at $385M, had $7.5K average contracts. RALY, the smallest of the group at $50M of ARR, had $50K contracts. There’s also only very weak correlation between ARR growth and contract sizes.

I would have expected the median to be larger for public companies. It’s clear from this data multi-billion dollar public SaaS companies can be built with relatively small ACVs, and I think other things like a big market opportunity, great product, team, and execution are more important factors in creating a large and enduring public SaaS company.

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General Partner at Meritech Capital

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