B2B SaaS Metrics based on 200+ Private Companies

MRR, Team Size, Revenue/Employee, ARPU, Customer Count, SMB vs Enterprise/Mid-Market and Funded vs Bootstrapped

• How do private B2B SaaS companies do in terms of MRR, team size, revenue/employee, number of customers, ARPU and churn rate?
• How do these metrics compare for Funded vs Bootstrapped companies?
• What difference does the target-customer size make (SMB vs Enterprise/Mid-Market)?
• Does funding accelerate growth? How much?
• Do these metrics correlate with each other?
• Should you optimize your SaaS business for any of them?

I analyzed a data set with the actual metrics of 214 top performing private SaaS companies to find the answers. This is going to be a series of posts, so stay tuned as more will be coming out soon.

In this post, I will present you the data set with some analysis, focusing on comparisons by target-customer size and funded vs bootstrapped.

Data Source

The data I used for this analysis were gathered by Nathan Latka. His source is his daily podcast, The Top, where he interviews successful entrepreneurs about their current companies; they talk about their product and business, while revealing specific numbers about their revenues, YoY growth, customer count, ARPU, CAC, churn, LTV, etc. You can access this information, at getlatka.com.

All this data, coming straight from each company’s founders and/or CEOs, is as accurate and reliable as it can get. Having said that, you should keep in mind the following:

• This is not your average sample. Most of these companies are crushing it, so expect some of the metrics presented below to be inflated accordingly.
• A few of the companies in the sample are not purely SaaS, but all of them have the bulk of their revenues coming in through the SaaS model.

Data Overview

The full data set will be split into four groups: funded companies, bootstrapped companies (have never raised), companies targeting Enterprise and/or mid-market clients, defined by ACV > 10K, and companies targeting SMBs, defined by ACV < 10K.

This demarcation between SMBs and Enterprise/Mid-Market is not industry-standard, but is widely used. Enterprise and Mid-Market are grouped together because the available sample contains less than 15 companies with ACV > 100K and less than 5 with ACV > 250K, which are commonly used lower limits for the Enterprise segment.

Moreover, many companies actually target both market segments, making this partitioning even less significant for this analysis. In the following charts, you can see the number of companies in each group on the horizontal axis, next to the group’s nametag.

MRR

Focusing on the chart above, we see that in every group the space between the median and the upper quartile is swollen and the average value is directly below or past the upper quartile, which means that there are a few companies in the sample with way higher MRR than the majority.

The funded companies present a bit higher MRR than the bootstrapped ones (+29% median, +55% average).

Most interestingly, though, the companies selling to Enterprise/Mid-Market do clearly better than those selling mainly to SMBs in terms of MRR (+200% median, +140% average).

This is surprising, given that according to this analysis on publicly traded SaaS companies by Tomasz Tunguz, “on average, a SaaS company in any of these three segments [i.e. Enterprise, Mid-Market, SMB] generates roughly equivalent revenue”.

So, why could this not be true for the private SaaS companies? Here is a possible explanation, but let me know what you think at the comments below:

Private companies are at an earlier stage of their life, loosely speaking, compared to public companies. The companies selling to SMBs in this sample are actually 6 years old on average (5 years median), well away from the 11 years of median age for tech IPOs (source), but very close to the Enterprise/Mid-Market group in this sample that has average and median age of 5 years.

Consequently, we should focus on the different characteristics between the SMB and the Enterprise/Mid-Market sector, and the ways they affect SaaS companies at the early and growth stages:

Selling to Enterprise as a startup is hard. You need to develop enterprise grade products from the get go, which usually requires raising substantial capital upfront, you need credibility and experience in your target industry and you usually need to employ expensive, high-touch sales processes.

On the other end, SMBs are satisfied with simpler and affordable solutions, so companies targeting SMBs don’t need much capital for product development and can get to revenue much faster, sales cycles are faster and more predictable, and less sophisticated sales teams can get the job done.

All of the above contribute to SMB-targeting SaaS companies having to surpass a lower bar to enter their market and grow at viable/profitable levels (compared to Enterprise/Mid-Market SaaS companies), and that may reflect accordingly to the levels of revenue they need/seek to achieve, on average.

Nevertheless, scaling to many thousands or millions of customers, in other words, reaching IPO-level success, is still brutally hard and only the top performing SMB SaaS companies make it there and go public.

Now let’s get back to the data and dig a bit deeper.

In the chart above, I broke down the Enterprise/Mid-Market and SMB groups into funded and bootstrapped companies. According to that, only 8 of the 87 (9%) Enterprise/Mid-Market SaaS companies in the sample are bootstrapped, which speaks volumes about the capital requirements for starting and growing an Enterprise/Mid-Market SaaS business.

These 8 companies have managed very impressive MRR metrics: $629K median MRR, which is 40% higher than the $450K median of the funded ones, and $1.5MM average MRR, almost identical to the average of the funded companies. However, due to the small sample size for the bootstrapped companies, I wouldn’t read too much into this comparison.

Note that the funded businesses in this group have raised $25.4MM on average ($9MM median).

Moving over to the SMB-targeting companies, we see that the funded are doing better than the bootstrapped ones, both in terms of average ($697K vs $476K respectively, funded doing +47%) and median ($150K vs $109K respectively, funded doing +38%) MRR. The funded SMB SaaS businesses have raised $11.3MM on average ($2.4MM median).

It is also worth mentioning that the total ARR to total funding ratio is equal to 0.75, regardless of the target-customer sector.

Team Size

Predictably, the funded SaaS companies have more employees (median team size: 36, average: 79.5) than the bootstrapped ones (median: 15, average: 40.3), since funding is mostly used to accelerate growth, which includes team size. Bootstrapped companies usually have to operate at least close to profitability at all times, thus, are forced to take a gradual approach to their teams’ growth and match it closely to their revenues’ growth.

The Enterprise/Mid-Market SaaS businesses have more employees (median team size: 44, average: 96.8) than those targeting SMBs (median team size: 24, average: 56.5), also an expected result, since the former have about 3 times more revenues than the latter.

In the following chart, I broke down the Enterprise/Mid-Market and SMB groups to funded and bootstrapped companies, but the story remains largely the same.

Revenue per Employee (per year)

The Revenue/Employee charts reveal some of the most interesting results: The bootstrapped companies outperform the funded ones with regard to this metric, regardless of the target-customer size.

This can be attributed to the lagging nature of the Revenue/Employee metric: A company uses funding to grow its team at a point in time, but that decision can have an effect only on future revenues (at a later point in time). The fact that the funded companies in this sample have median and average Revenue/Employee of about $100K and $140K respectively (34% and 23% less than the bootstrapped), indicates expectations for revenue growth in the coming months.

It is also worth mentioning that, according to the second Revenue/Employee chart, among the funded companies, those targeting Enterprise/Mid-Market accounts do much better on this metric than those targeting SMBs: +44% on median and 84% on average.

ARPU (monthly)

Most of the SMB-targeting companies in this sample generate between $25 and $200 revenue per customer, per month. The funded ones present higher median ARPU (+53%) and a bit lower average (-10%). Note, though, that 32% of the funded surpass that average, compared to just 28.6% of the bootstrapped.

In the Enterprise/Mid-Market group the funded SaaS companies do better than the bootstrapped ones, generating +36% on median ARPU and +68% on average. In this sector, though, only 8 companies are bootstrapped (in this sample), so the above result should not be deemed conclusive.

Customer Count

As expected, the SMB-targeting businesses have many more customers than the Enterprise/Mid-Market-targeting. Again, the funded vs bootstrapped comparison in the Enterprise/Mid-Market sector does not bear much weight:

Bootstrapped companies have 300 median customers, +50% vs the 200 median customers of the funded companies. On average, though, funded businesses do better by 13%, with 563 customers vs 496 for the bootstrapped businesses.

Focusing on the right side of the chart, it is evident there are a few companies in the sample that pull the SMB averages way up. The bootstrapped companies have about 24K customers on average, while the funded 27K (+13%). Median customers are 1750 and 3000 respectively, +71% for the funded companies.

Given that the funded companies present higher ARPU, their advantage on customer count is even more noteworthy, considering that higher price points usually come with smaller pools of potential customers.

Main takeaways & Final thoughts

The funded SaaS companies are doing better on average and median values than the bootstrapped ones, with regard to every metric presented above, other than Revenue/Employee.

However, the differences are not that wide and many bootstrapped companies are doing equally well — notice how the relevant quartile bars overlap for pretty wide ranges in almost every chart.

Another thing to consider is that many companies start out as bootstrapped and only after years of growth decide to raise money, preserving significant upside for their founders in the process. Many of the top bootstrapped SaaS companies have turned into funded in this way (such companies exist in this sample as well), partially skewing the results.

In a SaaS dominated world, with more tools and infrastructure readily available than ever before, this route is rapidly becoming all the more appealing and viable for many SaaS startups, especially in niche verticals and the SMB sector.

Closer to the Enterprise world, though, things get tougher for startups without funding for reasons I previously alluded to. In this sample there are 11 companies with ACV above $150K. Only one of them is bootstrapped and was founded back in 2003; the other companies were founded in 2010 (median and average).

While funding can be helpful for the SMB-targeting SaaS, especially for growth and/or growth acceleration, for the Enterprise-targeting SaaS it seems to be almost essential. However, many companies try to sidestep this by starting out in the SMB sector, only to expand in the Mid-Market/Enterprise latter on.

___

You are more than welcome to leave your feedback and thoughts or suggest topics for the posts to come. Find me on LinkedIn.

Originally published at getlatka.com.