Despite an ongoing macroeconomic turndown, growth is still on the table for SaaS companies
NEW YORK, July 20, 2023 /PRNewswire/ — Capchase, the revenue acceleration platform for Software-as-a-Service (SaaS) companies, today unveiled the results of its 2023 SaaS Benchmark Report, which compiles the performance data of more than 900 SaaS companies and shares recommendations for executives to grow their business faster and reach profitability sooner.
Over the last 18 months, early-stage SaaS companies have had to pivot from a “growth at all costs” mindset to instead focus on sustainability and profitability due to a global macroeconomic downturn. The report revealed that growth does not have to come at the expense of efficiency, even during a downturn. Additionally, the report highlighted recent SaaS industry trends for business leaders, which can be used to make informed decisions and drive growth and profitability while being fiscally responsible.
Overall, the demand for cloud-based applications and other trends, like remote-work, continue to drive a positive outlook for growth in the SaaS sector. Further takeaways based on key performance indicators from this report are:
- Annual Recurring Revenue (ARR) Growth Year-over-Year: Businesses in the top quartile for R40, a measure of growth versus burn for both venture-backed and bootstrapped SaaS businesses, are growing around three times as fast as their peers, experiencing higher growth early on as they are starting from a low base.
- Net Margin: Businesses putting an emphasis on balancing growth with burn are likely to reach profitability much sooner than their peers. Additionally, businesses focused on sustainable growth, rather than growth at all costs, are better able to respond to market shocks or funding crunches.
- Gross Margin: For SaaS businesses, gross margins are typically very high to reflect cost of goods sold (COGS) which are limited to hosting costs, and sometimes customer service costs. Gross margins are similar for average and top performers, likely due to the fact SaaS COGS are kept to a minimum by nature.
- Analysis by Funding Type: Despite spending less than a quarter of what their venture-backed peers spend on each new customer, bootstrapped businesses achieve similar levels of ARR growth. The report shows bootstrapped businesses are more efficient in acquisition spend, spending less overall, recouping acquisition costs faster, and maintaining higher customer lifetime value (LTV) to customer acquisition cost (CAC) ratios.
“At this moment, there is uncertainty about whether the slowdown in venture funding is merely a dip, or marks a more permanent correction to a previously overheated market. The report shows there is a silver lining to the current downturn, however, with the right practices in place. By eliminating discounts to increase average contract value and securing a financial buffer before it’s needed, companies can thrive in the current environment and beyond,” said Miguel Fernandez, co-founder and CEO of Capchase. “With the data found in our report, founders and executives can evaluate how their performance stacks up against competitors, and make strategic investments to become category leaders.”
In order to achieve sustainable growth and profitability, founders and executives should consider the following: Spend on sales and marketing initiatives with an immediate return, increase sales efficiency by reducing friction, safely pursue growth at all costs, and secure capital to invest in sustainable growth before you need it. Additionally, founders and executives can improve efficiency with better capital allocation by using equity only for long term initiatives, and using debt to fund more regular, predictable costs such as customer acquisition.
For this report, Capchase analyzed over 900 private SaaS companies with $1 million to $15 million annual recurring revenue. The data reflects Capchase’s SaaS database – one of the largest datasets of SaaS performance indicators based on actual financial data and sourced directly from customer companies’ own records.
To learn more or access the full 2023 SaaS Benchmark Report, click here.
About Capchase
Capchase is the leading provider of non-dilutive financing products to software-as-a-service (SaaS) and comparable recurring-revenue companies. Our mission is to help founders grow their businesses faster through non-dilutive capital, market insights, and community support. Founded in 2020 and headquartered in New York City, Capchase provides financing by bringing future expected cash flows to the present day – thereby securing funding that is fast, flexible, and doesn’t dilute their ownership. To date, Capchase has worked with over 4,000 businesses and partners, and made more than $2 billion in funding available to the SaaS industry. To learn more about Capchase visit capchase.com.
SOURCE Capchase