When non-recurring revenue is valuable

Sammy Abdullah
Oct 2, 2018 · 2 min read

VCs love businesses with recurring revenue, and many VCs won’t ascribe any value to non-recurring revenue streams. That said, do not make the mistake of forsaking non-recurring revenue streams. If you do, you’re ignoring a great source of free financing as well as other benefits. Non-recurring revenue streams like onboarding fees and installation fees are a fantastic source of cash, which means you won’t have to raise as much money to achieve your goals. Other non-recurring revenue streams such as ongoing services or support are great for staying in touch with the customer, which prevents churn and uncovers upsell opportunities.

Of the 82 publicly traded SaaS businesses we monitor, 49 of them break out their recurring SaaS revenue from other sources of revenue. We present the list below to show that some of the largest SaaS success stories derive significant revenue from non-subscriptions sources. Note that N/A means the revenue was not broken out.

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Of the 49 companies, on median and average, 83% and 79% of revenue is derived from subscriptions, which leaves a healthy minority of revenue represented by non-recurring streams (17% and 21%). Other revenue streams are diverse: Atlassian and Splunk derive a significant portion of revenue from maintenance, MobileIron derives a fair amount from perpetual licenses and support, and Shopify generates material revenue from merchant processing fees.

If you’re generating revenue only from subscriptions, there is revenue you’re leaving behind which can serve as free cash financing and make your product stickier to the customer. Although VC may not like non-recurring revenue, it will help you build a real business similar to the public companies shown.

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Sammy Abdullah

Written by

co-founder at Blossom Street Ventures. Email me at sammy@blossomstreetventures.com

Data Driven Investor

empower you with data, knowledge, and expertise

Sammy Abdullah

Written by

co-founder at Blossom Street Ventures. Email me at sammy@blossomstreetventures.com

Data Driven Investor

empower you with data, knowledge, and expertise

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