2015 Pacific Crest Securities Private SaaS Company …...2 Pacific Crest 2015 Private SaaS Company...

1

2015 Pacific Crest

Private SaaS Company

Survey Results

October 16, 2015

2

Pacific Crest 2015 Private SaaS Company Survey:

Summary of Results

This report provides an analysis of the results of a survey of private SaaS companies

which Pacific Crest’s software investment banking team conducted in June-July 2015

– Represents the sixth such survey Pacific Crest has completed

– The survey results include responses from senior executives of 305 companies. Special thanks

to our partners at Matrix Partners, who helped solicit participants through the forEntrepeneurs

blog

Broad diversity of SaaS companies participated. Representative statistics on the

participant pool:

– $4MM median revenues, with 133 companies >$5MM and 57 >$25MM

– 47 median full-time employees (range of 2 to 1,200)

– Median customer count of approximately 300; 28% of respondents have >1,000 customers

– 70% of participants headquartered in the U.S.

– $21K median annual contract value (ACV), with 21% of participants below $5K and 17% above

$100K. Good mix of field sales (41% use as predominant mode), inside sales (21%), as well as

Internet, channel, and mixed modes

Our goal is to provide useful operational and financial benchmarking

data to executives and investors in SaaS companies

3

Survey Participant Geography (HQ)

U.S. Regions

Northern California – Silicon Valley 48

Southern California 14

Boston / New England 35

Pacific Northwest 13

New York Metropolitan Area 19

Washington DC 11

Southeast U.S. 26

Midwest / Chicago 23

Colorado / Utah 6

Texas 10

Other U.S. 6

TOTAL U.S. : 211

Other Locations

Canada 19

Europe 40

Middle East / Africa 3

Latin America 6

Australia / New Zealand 13

Asia 13

TOTAL Non-U.S. : 94

13

13 6

211

40

3

19

305 respondents

Comparison with

Previous Surveys

31% international, up from

21% last year.

4

62

40

28 3024

19

26 25 2622

0

10

20

30

40

50

60

70

<15 15-25 25-35 35-50 50-75 75-100 100-150 150-250 250-500 500+

Nu

mb

er

of

Co

mp

an

ies

Full-Time Equivalent Employees

74

59

3532

18

26

1714 12 12

0

10

20

30

40

50

60

70

80

<$750k $750k-$2.5MM

$2.5MM-$5MM

$5MM-$10MM

$10MM-$15MM

$15MM-$25MM

$25MM-$40MM

$40MM-$60MM

$60MM-$100MM

Greaterthan

$100MM

Nu

mb

er

of

Co

mp

an

ies

2014 Revenue

Survey Participant Size Distribution

299 and 302 respondents, respectively

Median ≈ $4MM

Median ≈ 47

Revenue

FTEs

5

Less than$100k

$125k $125k $129k

$164k

$143k $143k

$188k

$230k

$0k

$50k

$100k

$150k

$200k

$250k

<$2.5MM $2.5MM-$5MM

$5MM-$10MM

$10MM-$15MM

$15MM-$25MM

$25MM-$40MM

$40MM-$60MM

$60MM-$100MM

Greaterthan

$100MM

Med

ian

2014 G

AA

P R

ev

en

ue p

er

FT

E

Sized Company (2014 Revenue)

Revenue per FTE Efficiency

Respondents: <$750k: 74; $750k-$2.5MM: 59; $2.5MM-$5MM: 35; $5MM-$10MM: 32; $10MM-$15MM: 17; $15MM-$25MM:

26; $25MM-$40MM: 17; $40MM-$60MM: 13; $60MM-$100MM: 12; >$100MM: 12

Median ≈ $112K

(Excl. <$2.5MM)

Median ≈ $142K

6

GROWTH RATES

7

2

17

44 45

32

18

13

30

23

69

3

10

35

48

36

2023 23

19

72

0

10

20

30

40

50

60

70

80

<0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%-60% 60%-80% 80%-100% >100%

Nu

mb

er

of

Co

mp

an

ies

2014 GAAP Revenue Growth 2015E GAAP Revenue Growth

How Fast Did / Will You Grow GAAP Revenues?


Median 2014 GAAP Rev Growth ≈ 44%

Median 2015E GAAP Rev Growth ≈ 46%

Comparison with

Previous Surveys

These results are

markedly up from medians

of 37% and 42% growth

for 2013 and 2014E,

respectively, reported in

last year’s survey, and

closer to the 2013 survey

results (41% and 47% for

2012 and 2013E growth,

respectively).

The median

revenue growth

achieved by

survey

respondents in

2014 was 44%,

while the median

projected growth

for 2015 is 46%.

8

0

10

27

34

23

1210

24

8

21

1

7

23

36

28

12

17

14

9

19

0

5

10

15

20

25

30

35

40

<0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%-60% 60%-80% 80%-100% >100%

Nu

mb

er

of

Co

mp

an

ies

2014 GAAP Revenue Growth 2015E GAAP Revenue Growth

How Fast Did / Will You Grow GAAP Revenues? (Excluding Companies <$2.5MM in Revenue)


Median 2014 GAAP Rev Growth ≈ 36%

Median 2015E GAAP Rev Growth ≈ 36%

As expected,

many of the

fastest growers

are among the

smallest

companies.

Eliminating them

brings median

growth rates

down

approximately

10% points.

9

43%

70%

36%

29%31%

36%35%

31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

$2.5MM-$5MM

$5MM-$7.5MM

$7.5MM-$10MM

$10MM-$15MM

$15MM-$25MM

$25MM-$40MM

$40MM-$75MM

>$75MM

2014 R

ev

en

ue G

row

th R

ate

2014 GAAP Revenue

Median Growth Rate as a Function of Size of Company (Excluding Companies <$2.5MM in Revenue)

Respondents: $2.5MM-$5MM: 35, $5MM-$7.5MM: 18, $7.5MM-$10MM: 14, $10MM-$15MM: 17, $15MM-25MM: 26, $25MM-

$40MM: 18, $40MM-$75MM: 19, >$75MM: 20

Median ≈ 36%

The results indicate

that companies in the

$5-$7.5MM range

are among the

fastest growers –

with the median

much greater than

the median of

companies half their

size.

Comparison with

Previous Surveys

We saw a similar

phenomenon of a bump-

up last year for companies

at this size, although our

data was not as finely

segregated (the bump-up

group was $5-$10MM).

10

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$2.5MM -$5MM

$5MM-$7.5MM

$7.5MM-$10MM

$10MM-$15MM

$15MM-$25MM

$25MM-$40MM

$40MM-$75MM

>$75MM

2014 R

ev

en

ue G

row

th R

ate

2014 GAAP Revenue

Median Growth Rate as a Function of Size of

Company – Middle Third Group (Excluding Companies <$2.5MM in Revenue)

87% 84%

38% 38%

52%

43%

27%

61%

23% 24% 26%

21%

Highlighted range represents the 33rd-67th percentile of data

Respondents: $2.5MM-$5MM: 35, $5MM-$7.5MM: 18, $7.5MM-$10MM: 14, $10MM-$15MM: 17, $15MM-25MM: 26, $25MM-

$40MM: 18, $40MM-$75MM: 19, >$75MM: 20

Median ≈ 36%

Looking at the

middle third of

respondents in

each size group

suggests that the

$2.5-$5MM

companies are

also among the

fastest growers.

73%

23%

46%

27%

11

33%

36%

33% 33%

38%

62%

37%

0%

10%

20%

30%

40%

50%

60%

70%

<$5K $5K-$15K $15K-$25K $25K-$50K $50K-$100K $100K-$250K >$250K

20

14

Re

ve

nu

e G

row

th

Median Contract Size (ACV)(1)

Median Growth Rate as a Function of Contract Size (Excluding Companies <$2.5MM in Revenue)

(1): Annual Contract Value (ACV) is defined as annualized monthly run rate in recurring SaaS revenues, excluding professional services,

perpetual licenses and related maintenance

(2): Discrepancy from 35% median on slide 7; smaller set of respondents who answered both questions

Respondents: <$5K: 20, $5K-$25K: 24, $25K-$100K: 44, $100K-$250K: 14, >$250K: 16

Median ≈ 36%(2)

There appears to be

no relationship

between median

contract size and

growth other than a

bump-up for the

$100K- $250K group

(though this could be

skewed by sparse

data in that group).

Comparison with

Previous Surveys

Last year, the bump-up

occurred for companies in

the ranges encompassing

$5K-$100K ACV.

12

31%

37%

23%

65%

43%

0%

10%

20%

30%

40%

50%

60%

70%

Field sales Inside sales Internet sales Channel Sales(VARs, OEMs, etc)

Mixed

201

4 G

row

th R

ate

Primary Mode of Distribution(1)

Median Growth Rate as a Function of Sales Strategy (Excluding Companies <$2.5MM in Revenue)

(1): Primary Mode of Distribution – At least 50% of new ACV bookings from new customers in 2015E come from designated distribution

channel; “Mixed” defined as respondents who didn’t select at least 50% for any designated distribution channel

Respondents: Field: 66, Inside:35, Internet: 8, Channel: 8, Mixed: 46

Median ≈ 35%

We found that median

growth among field

sales dominated

companies slightly

lagged inside sales

dominated companies

(by 6% points), but led

internet sales by 8%

points. Channel sales

dominated companies

grew significantly

faster, though the data

is sparse. Mixed also

performed well.

Comparison with Previous

Surveys

Field sales lagged inside

sales by a greater amount

this year (6% in 2015 vs. an

insignificant 2% difference in

2014).

13

63%

43%

38%

57%

28%

33% 33%

48%

0%

10%

20%

30%

40%

50%

60%

70%

VSB SMB Enterprise Mixed

2014 G

row

th R

ate

All Companies Excluding Companies <$2.5MM in Revenue

Median Growth Rate as a Function of Target Customer(1)

(1): Target Customer – At least 50% of revenues come from designated customer base; “Mixed” defined as respondents who didn’t select at

least 50% for any designated customer base

VSB customers defined as <20 employees, SMB as ~100-1,000 employees, and enterprise as >1,000

Respondents: VSB: 18 and 7, SMB: 67 and 36, Enterprise: 97 and 68, Mixed: 105 and 53, respondents, respectively

Median Revenue Growth ≈ 44%

Median Revenue Growth (excl. <$2.5MM Revenue) ≈ 36% Companies with

mixed/balanced

target customer

strategies are

growing the

fastest.

Otherwise, at

least for

companies

>$2.5MM in

revenues, there

aren’t significant

differences.

Comparison with

Previous Surveys

A big change for the

“mixed” group. Last year’s

survey showed no

advantage for mixed /

balanced target customer

companies.

14

GO-TO-MARKET

15

Primary Mode of Distribution

Primary Mode of Distribution – At least 50% of new ACV bookings from new customers in 2015E come from designated distribution channel;

“Mixed” defined as respondents who didn’t select at least 50% for any designated distribution channel


Comparison with

Previous Surveys

Results were very similar

to last year, with a slight

shift away from inside

sales strategies towards

mixed distribution models.

All Companies Excluding Companies

<$2.5MM in Revenue Field sales

remains the most

popular way to

sell, with 41% of

participants

employing it as

their primary

mode of

distribution (32%

if we exclude

companies with

<$2.5MM in

revenues).

Field Sales32%

Inside Sales 22%

Internet Sales10%

Channel 6%

Mixed30%

Field Sales41%

Inside Sales 21%

Internet Sales5%

Channel 5%

Mixed28%

16

8% 11% 13%17%

45%52%

77%

62%

15%

27%

45% 34%

24% 7%

46% 19%

10%

3%

3%

4%

8%

8%

10%

3%

5%

5%

8%

23%

35%

23%

41%

24%

37%

18%

31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

<$1k $1k-$5k $5k-$15k $15k-$25k $25k-$50k $50k-$100k $100k-$250k >$250k

Median Contract Size (ACV)

Field Inside Internet Channel Mixed

Primary Mode of Distribution as a Function of Median

Initial Contract Size

Note: Initial ACV of a contract

2015 Respondents: <$1K: 13, $1K-$5K: 37, $5K-$15K: 40, $15K-$25K: 29, $25K-$50K: 38, $50K-$100K: 27, $100K-$250K: 22,

>$250K: 13

Comparison with

Previous Surveys

Results are very similar to

last year, except for

companies with median

ACVs over $250K, where

in this year’s results, we

see noticeably more

companies using inside

sales.

Analyzed by

contract value,

field sales

dominates for

companies with

median deals

over $50K and

more or less

disappears when

median deal

sizes are below

$15K. There’s

meaningful

bifurcation

among the $15K-

$25K and $25K-

$50K groups.

17

$15K-$50K Median Contract Size

Field-Dominated Inside-Dominated

Revenue $20MM $11MM

Growth Rate 28% 29%

Revenue per FTE $117K $131K

Annual Gross Dollar Churn(1) 7% 12%

Net Dollar Retention Rate(1) 106% 115%

CAC(1) $1.09 $1.04

S&M % of Revenue 41% 41%

Distribution Strategy – Analysis of Field vs. Inside Sales in

Key Crossover Deal Size Tiers (Excluding Companies <$2.5MM in Revenue)

(1) See definitions described later in this presentation

Respondents: Field-Dominated: 11; Inside-Dominated: 9

Among companies

selling $15K-$50K

ACV, we compared

those favoring field

vs. inside and

found: (1) larger

companies tended

to favor field; (2)

inside sales driven

companies had

slightly higher

efficiency, as

reflected in $/FTE,

however CAC,

S&M expense

ratios and growth

were virtually

identical; and (3)

gross churn was

higher for inside,

but net dollar

retention was also

higher, suggesting

more success with

“land-and-expand”.

18

6

15

19

14

23

24

17

15

9

0 5 10 15 20 25 30

Less than $0.25

$0.25-$0.50

$0.50-$0.75

$0.75-$1.00

$1.00-$1.25

$1.25-$1.50

$1.50-$2.00

$2.00-$3.00

Over $3.00

CAC(1): How Much Do You Spend for $1 of New ACV from a

New Customer? (Excluding Companies <$2.5MM in Revenues)

“How much do you spend on a fully-loaded sales & marketing cost basis to acquire $1 of

new ACV from a new customer?”

Median ≈ $1.18

(1): Includes the fully-loaded amount spent on sales & marketing for the win, over multiple periods, if necessary.

142 respondents

Respondents

(excluding the

smallest

companies)

spent a median

of $1.18 to

acquire each

dollar of new

ACV from a new

customer. The

result drops to

$1.06 if we

include

companies with

<$2.5MM in

revenues.

Comparison with

Previous Surveys

The median result is

notably higher than the

$1.07 and $0.92 reported

in the 2014 and 2013

surveys, respectively.

19

$0.68

$0.11 $0.07

$0.55

$0.33

$1.18

$0.28

$0.13

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

New ACV from NewCustomer

Upsell to ExistingCustomer

Renewals

CAC on New Customers vs. Upsells vs. Renewals (Excluding Companies <$2.5MM in Revenues)

Respondents: New ACV from New Customer: 142, Upsell to Existing Customer: 102, Renewals: 97

The median CAC

per $1 of upsells

is $0.28, or about

24% of CAC to

acquire each

new customer

dollar. The CAC

for renewals is

$0.13, or 11% of

the CAC to

acquire each

new customer

dollar.

Comparison with

Previous Surveys

The cost of upsells ($.28)

has increased from the

$.18 reported in 2014,

while the cost of renewals

remains almost identical.

25th percentile

75th percentile

Median

$1.50

20

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Field Sales Inside Sales Channel Internet Sales

<$0.25 $0.25 - $0.50 $0.50 - $0.75 $0.75 - $1.00 $1.00 - $1.25

$1.25 - $1.50 $1.50 - $2.00 $2.00 - 3.00 >$3.00

CAC Spend by Primary Mode of Distribution

Respondents: Field sales: 63, Inside sales: 56, Channel sales: 12, Internet sales: 20 (includes Companies <$2.5MM in revenue)

Comparison with

Previous Surveys

All modes have shown

increases except Internet,

which is down from $0.54

to $0.42.

As expected,

field sales has

the most

expensive CAC

at $1.14, followed

by inside sales at

$0.90. Channel

and online

distribution have

significantly

lower CACs at

$0.66 and $0.42,

respectively.

Median ≈ $0.66 Median ≈ $0.42 Median ≈ $1.14 Median ≈ $0.90

21

75%

62%

35%

25%

38%

65%

Field Sales Inside Sales Internet Sales

69%

31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Overall

% o

f C

AC

Sale

s &

Mark

eti

ng

Sp

en

d

CAC Composition: Sales vs. Marketing Cost % of CAC

Overall, the

median company

devotes 31% of

their CAC to

Marketing

expenses, with

the remaining

69% allocated to

Sales. However,

Inside Sales- and

Internet Sales-

driven

companies have

a much greater

reliance on

Marketing, with

38% and 65% of

their CAC

budgets devoted

to Marketing,

respectively.

Respondents: 290; Field Sales: 93; Inside Sales: 64; Internet Sales: 28

Note: Overall group also includes Channel Sales and Mixed Strategy dominated companies not shown on graph

75%62%

35%

25%38%

65%

Field sales Inside sales Internet sales

Sales Marketing

22

20

39

26

23

16

43

24

10

19

8

6

16

9

7

5

0

5

10

15

20

25

30

35

40

45

50

<3 mos. 3-5 mos. Approx.6 mos.

7-9 mos. 9-11mos.

Approx.1 year

13-15mos.

15-17mos.

Approx.18 mos.

19-21mos.

21-23mos.

Approx.2 years

2.0 - 2.5years

2.5-3.0years

>3 years

# o

f R

esp

on

den

ts

CAC Payback Period

CAC Payback Period (Gross Margin Basis)

271 respondents

For the first time

we asked about

CAC payback

period (defined

as # of months of

subscription

gross profit it

takes to recover

the fully loaded

cost of acquiring

the customer).

Respondents

reported a

median CAC

payback of ~12

months, though

we note a wide

distribution of

responses.

Median ≈ 12 months

23

Median CAC Payback Period by Primary Mode of Distribution

Respondents: All Companies: Field sales: 84, Inside sales: 61, Channel sales: 15, Internet sales: 24, Mixed: 83 (includes Companies <$2.5MM

in revenue)

Respondents (>$2.5MM Revenue): Field sales: 60, Inside sales: 33, Internet sales: 7, Channel sales: 7, Mixed: 44

13.4

12.0

7.3

8.0

12.0

14.5

12.0

10.0

14.0

12.0

0

2

4

6

8

10

12

14

16

Field sales Inside sales Internet sales Channel Mixed

CA

C P

ayb

ack P

eri

od

(m

on

ths

)

Distribution Type

All Companies Excluding Companies <$2.5MM in Revenue

Field Sales-

dominated

companies have

20% longer CAC

payback periods

than those

primarily using

Inside Sales,

which in turn

have

approximately

20% longer CAC

payback periods

than those

relying primarily

on Internet Sales.

24

11%

15%14%

17%

21%

16%

32%

28%

0%

5%

10%

15%

20%

25%

30%

35%

<$1.25M $1.25MM -$2.5MM

$2.5MM -$5MM

$5MM -$15MM

$15MM -$25MM

$25MM -$40MM

$40MM -$75MM

>$75MM

% N

ew

AC

V f

rom

Up

sells

2014 GAAP Revenue

What Percentage of New ACV is from Upsells to Existing

Customers?

Respondents: <$1.25MM: 71, $1.25MM-$2.5MM: 19, $2.5MM-$5MM: 23, $5MM-$15MM: 35, $15MM-25MM: 22, $25MM-$40M: 15,

$40MM-$75M: 17, >75MM: 15

Median ≈ 16%

Comparison with

Previous Surveys

Largely consistent with

prior years’ results.

The median

respondent gets 16%

of new ACV sales

from upsells; larger

companies rely more

heavily on upsells.

25

9%8%

18%

15%16%

13%

27%

13%

18%17%

23% 23%

25%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

<$2.5MM $2.5MM to$5MM

$5MM to$10MM

$10MM to$15MM

$15MM to$25MM

$25MM to$40MM

>$40MM

% N

ew

AC

V f

rom

Up

sells

2014 GAAP Revenue

Bottom 50% Growers Top 50% Growers

Are the Fastest Growing Companies Relying More on

Upsells?… Yes

Median ≈ 16%

Almost across

the board, the

fastest growers

tended to have

noticeably more

reliance on

upsells.

Respondents: <$2.5MM: 86, $2.5MM-$5MM: 23, $5MM-$10MM: 23, $10MM-$15MM: 12, $15MM-25MM: 22 $25MM-$40M: 15, >$40MM: 32

Comparison with

Previous Surveys

2014 showed a similar

result for companies

above $10MM but not

below. Now the fastest

growing smaller

companies are also

focusing on upsells.

What Percentage of New ACV is from Upsells to Existing Customers?

26

7

5

7

3

16

15

10

16

8

7

16

18

0 10 20

< (25%)

(15%)-(25%)

(5%)-(15%)

(1%)-(5%)

0%

0-10%

10-20%

20-25%

25-30%

30-40%

40-50%

>50%

45

35

21

12

5

5

1

2

0 10 20 30 40 50

0-10%

10-25%

25-50%

50-75%

75-100%

100-150%

150-200%

>200%

Professional Services Impact on Go-to-Market (Excluding Companies <$2.5MM in Revenue)


Professional Services (as % of 1st year ACV)

Professional Services Margin

Median ≈ 20%

Professional

services play a

minor role for

most, with the

median company

booking P.S.

revenues on new

deals equivalent

to 18% of first

year subscription

contract value.

Median P.S.

margins are

approx. 20%.

Comparison with

Previous Surveys

Median attach rates are

up, from 13% in the 2014

survey to 18% this year.

Margins are unchanged.

Median ≈ 18%

27

26%

18% 18%

11%

0%

5%

10%

15%

20%

25%

30%

Enterprise SMB VSB Mixed

Pro

fessio

na

l S

erv

ices %

of

1st

Year

AC

V

Target Customer

Professional Services (% of 1st Year ACV) as a Function of

Target Customer (Excluding Companies <$2.5MM in Revenue)

Median ≈ 18%

Respondents: Enterprise: 52, SMB: 27, VSB: 3, Mixed: 40

As expected,

companies

which are

focused mainly

on enterprise

sales have

higher levels of

professional

services.

Comparison with

Previous Surveys

Attach rates ticked up

significantly across the

board (2014 survey:

Enterprise 18%, SMB 8%,

VSB 6%, Mixed 9%).

28

15

5

11

16

18

29

39

42

29

32

0 5 10 15 20 25 30 35 40 45

<50%

50-55%

55-60%

60-65%

65-70%

70-75%

75-80%

80-85%

85-90%

>90%

Subscription Gross Margins

“What is your gross profit margin on just subscription/SaaS revenues?”

236 respondents

Median

subscription

gross margins

are 78% (nearly

identical when

removing the

smallest

companies from

the group). Median ≈ 78%

>90%

<50%

Comparison with

Previous Surveys

Virtually unchanged from

the 2014, 2013 and 2012

results.

29

None

0-10%

10-25%

> 25%

73%

13%

5%

9%

None

0-10%10-50%

> 50%

Freemium / “Try Before You Buy”

“Freemium”

Expected New ACV in 2014 from

“Freemium” Leads

“Try Before You Buy”

Expected New ACV in 2014 from

“Try Before You Buy” Leads


Comparison with

Previous Surveys

Very consistent results

with previous years.

Approximately

30% of

companies

derive some

amount of new

ACV from

“freemium”

strategies,

though virtually

no one drives

their business on

it. “Try Before

You Buy” is

much more

commonly used:

60% derive

revenues through

this strategy, and

30% derive the

majority of their

new ACV

through “Try

Before You Buy”.

New ACV

New ACV

New ACV

New ACV

New ACV

New ACV

New ACV

39%

13%

19%

30%

New ACV

30

65

20

16

9

25

30

49

28

12

6

20

6

23

0

10

20

30

40

50

60

0-1% 1-3% 3-5% 5-6% 6-7% 7-8% 8-9% 9-10% 10-11% 11-12% 12-13% 13-15% 15-17% 17+%

Nu

mb

er

of

Re

sp

on

de

nts

Sales Commission (As % of ACV)

Sales Commissions

255 Respondents

Median Commission Paid ≈ 9%

Comparison with

Previous Surveys

Overall consistent with

2014, 2013 and 2012

results, though granular

bucketing of potential

survey responses this

year resulted in additional

detail.

The median

reported sales

commission rate

for the group is

approx. 9% of

ACV.

31

01

12

8

3

6

13

24

13

7

3

10

1

10

12

5 5

3

9

12 12

7

12

7

3 3

0

5

10

15

20

25

30

0-1% 1-3% 3-5% 5-6% 6-7% 7-8% 8-9% 9-10% 10-11% 11-12% 12-13% 13-15% 15-17% 17+%

Nu

mb

er

of

Resp

on

den

ts

Sales Commission (As % of ACV)

Field Inside

Sales Commissions by Sales Strategy

Respondents: Field : 111, Inside: 72

Median Inside Commission Paid ≈ 8.9% The survey

results indicate

that median

sales

commission rates

are only slightly

higher for Field

Sales versus

Inside Sales.

Median Field Commission Paid ≈ 9.5%

Comparison with

Previous Surveys

Similar to 2014 survey

results, though granular

bucketing of potential

survey responses this

year resulted in

additional detail.

32

8%

9%

10% 10% 9.5% 9.5%

0%

2%

4%

6%

8%

10%

12%

<$1K $1K-$5K $5K-$25K $25K-$100K $100K-$250K >$250k

Med

ian

Sale

s C

om

mis

sio

n


Sales Commissions as a Function of Median

Contract Size

Respondents: <$1K: 8, $1K-$5K: 34, $5K-$25K: 64, $25K-$100K: 59, $100K-$250K: 21, >$250K: 13

Median ≈ 9%

Comparison with

Previous Surveys

In 2014, “Elephant

hunters” (>$250k median

ACV) had materially lower

commission rates (7%).

We note that the 2015

results are consistent with

results from two years

ago.

There was a high

degree of

consistency in

commission rates

across contract

sizes.

33

Additional Commission for

Extra Years on Initial Contract

No Additional

Commission32%

Nominal Kicker 26%

Full Commission 20%

% of Respondents Paying:

Upsells

8%

% of Respondents

Paying Full

Commission(1)

45%

Median

Commission Rate

on Upsells

Renewals

2%

% of Respondents

Paying 0-1%

on Renewals

42%

Median

Commission Rate

on Renewals

Commissions for Renewals, Upsells and Multi-Year Deals

(1) Same rate (or higher) than new sales commissions

Respondents: Renewals: 224, Upsells: 233, Extra Years on Initial Contract: 216

Comparison with

Previous Surveys

The most significant

changes this year include:

1) Upsells: this year just

45% paid full commission

rates on upsells, vs. 58%

in last year’s group;

2) This year just 32% paid

no additional commission

on longer term contracts

vs. 42% in last year’s

group.

Not surprisingly,

commissions on

renewals are

typically deeply

discounted, with

a median rate of

2%. Upsells

command a

median rate of

8%, and nearly

half of the

companies pay

full commissions

on upsells.

34

6%

3%

8%

6%

8%

7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

0-1% 1-3% 3-5% 5-7% 7-9% >9%

Gro

ss D

oll

ar

Ch

urn

%

Commissions on Renewals

Effect of Renewal Commission Rates on Gross Dollar

Churn (Excluding Companies <$2.5MM in Revenue)

(1) The difference in medians compared to pg. 52 is due to different samples.

Respondents: 0-1%: 35, 1-3%: 35, 3-5%: 13, 5-7%: 10, 7-9%: 5, >9%: 8

Median ≈ 6%(1)

One natural

question to ask is

whether

companies which

pay higher

commissions on

renewals

experience lower

churn. The

following chart

suggests that

there is little

correlation

between

commissions on

renewals and

gross churn.

35

33%

38%

27%

33%

57%

0%

10%

20%

30%

40%

50%

60%

70%

0-1% 1-3% 3-5% 5-7% >7%

201

4 R

ev

en

ue

Gro

wth

Commissions on Renewals

Median Growth Rate as a Function of Commissions

on Renewals (Excluding Companies <$2.5MM in Revenue)

Median ≈ 35%

Respondents: 0-1%: 52, 1-3%: 43, 3-5%: 15, 5-7%: 11, >7%: 15

Companies

offering 7% or

greater

commissions on

renewals have

experienced the

highest growth

rate.

36

OPERATIONAL ASPECTS

37

Self-Managed Servers

37%

Amazon Web

Services (AWS)40%

Salesforce15%

Azure3%

Other Third Party16%

Self-Managed Servers

35%

Amazon Web

Services (AWS)44%

Salesforce14%

Azure6%

Other Third Party11%

How is Your SaaS Application Delivered?

Respondents: Now: 282 respondents, 3 Years from Now: 280 respondents

Now 3 Years from Now We asked

participants to

provide information

on their primary

application delivery

method (in-house

or third-party) and

how they expect

that to change over

the next three

years. Over 60%

already use 3rd

parties

predominantly (two-

thirds of which is

AWS); expectations

for the future show

little change.

Comparison with

Previous Surveys

The trend toward using 3rd

party public cloud is huge

– self-managed is down

from 52% last year to 37%

this year!

38

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Less than$1.25MM

$1.25MM to$2.5MM

$2.5MM to$5MM

$5MM to$10MM

$10MM to$15MM

$15MM to$25MM

$25MM to$40MM

Greater than$40MM

Self-Managed Servers Amazon Web Services (AWS) Salesforce1 Microsoft Azure Other Third Party

SaaS Application Delivery Method(1) as a Function

of Size of Company

(1): Defined as “predominant” mode of delivery

Respondents: Less than $1.25MM: 96, $1.25MM-$2.5MM: 27, $2.5MM-$5MM: 34, $5MM-$10MM: 30, $10MM-$15MM: 14,

$15MM-$25MM: 25, $25MM-$40MM: 17, Greater than $40MM: 36, respectively

When filtered by

company size,

smaller

respondents

reported more

frequent use of

third-party

providers as their

primary

application

delivery method,

while the largest

companies were

more likely to use

self-managed

servers.

Comparison with

Previous Surveys

We see a shift away from

self-managed at every

level.

39

60%

23%

38%

31% 32%

43%

33%

82%

67%68%

36%

28%

33%

52%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

<$2.5MM $2.5MM to$5MM

$5MM to$10MM

$10MM to$15MM

$15MM to$25MM

$25MM to$40MM

>$40MM

201

4 R

ev

en

ue

Gro

wth

Ra

te

2014 GAAP Revenue

Self Managed Third-Party

Comparison of Growth Rates for Companies Managing

Their Own Servers vs. Using 3rd Parties

Respondents: <$2.5MM: 24 and 92, $2.5MM-$5MM: 11 and 23, $5MM-$10MM: 14 and 16, $10MM-$15MM: 6 and 8, $15MM-$25MM: 13 and

12, $25MM-$40MM: 8 and 9, >$40MM: 26 and 10, respectively

Companies that

delivered their

applications

through third -

party managed

servers generally

experienced

faster growth

rates (in some

cases

considerably

faster)

Self-Managed

Median ≈ 32%

Third-Party

Median ≈ 47%

40

6% 6%

16%

4%

5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Self-ManagedServers

Amazon WebServices (AWS)

Salesforce1 Microsoft Azure Other Third Party

2014 A

pp

licati

on

Deliv

ery

Co

st

as %

of

Rev

en

ue

What Are Your Operational Costs to Deliver the SaaS

Application?

Respondents: Self-Managed: 86, AWS: 101, Salesforce1: 10, Microsoft Azure: 8, Others: 38

Median ≈ 6%

Respondents

relying primarily

on self-managed

servers reported

a median

delivery cost of

6% of sales,

comparable to

those primarily

using AWS. The

median cost of

delivery for

respondents on

Salesforce1 was

considerably

higher at 16%.

Comparison with

Previous Surveys


2014 results.

Significantly more expensive, but

see following analysis suggesting

comparable overall costs

41

77% 78%

83%

90%

79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Self-ManagedServers

Amazon WebServices (AWS)

Salesforce1 Microsoft Azure Other Third Party

201

4 S

ub

scri

pti

on

Gro

ss M

arg

in

Subscription Gross Margin as a Function of SaaS

Application Delivery Method

Respondents: Self-Managed: 90, AWS: 87, Salesforce1: 12, Microsoft Azure: 5, Others: 35

Median ≈ 78%

Interestingly,

despite the

aforementioned

differences in

estimated

operational

costs, median

subscription

gross margins

were much more

closely aligned

when filtered by

SaaS application

delivery method.

(Azure aberration

is likely due to

sparse data).

42

8%

11%

7%

5%

9%

11%

6%

10%

4%

10%

6% 6%

8%

11%

0%

2%

4%

6%

8%

10%

12%

<$2.5MM $2.5MM to$5MM

$5MM to$10MM

$10MM to$15MM

$15MM to$25MM

$25MM to$40MM

>$40MM

2014 A

pp

licati

on

Deliv

ery

Co

st

as a

% o

f R

ev

en

ue

2014 GAAP Revenue

Self-Managed Third-Party

Operational Costs as a Function of SaaS Application

Delivery, Grouped by Size Tiers

Somewhat

surprisingly,

among

respondents, a

company’s size

has little impact

on delivery costs

as a percentage

of revenues.

Third-Party

Median ≈ 9%

Respondents: <$2.5MM: 22 and 56, $2.5MM-$5MM: 8 and 19, $5MM-$10MM: 10 and 14, $10MM-$15MM: 5 and 5, $15MM-$25MM: 13 and 11,

$25MM-$40MM: 5 and 9, >$40MM: 20 and 8, respectively

Self-

Managed

Median ≈ 7%

Comparison with

Previous Surveys

In 2014, companies

deploying self-managed

servers generally faced

greater operational

costs.

43

COST STRUCTURE

44

2015E Median "At Scale"(1) Median

Gross Margin 74% 79%

Operating Expense Margins:

Sales & Marketing 32% 27%

R&D 24% 19%

G&A 16% 13%

EBITDA 1% 17%

FCF 3% 17%

YoY Growth Rate 31% 25%

Cost Structure and Future Expected Operating Leverage (Excluding Companies <$2.5MM in Revenue)

(1): Note – Survey describes scale as “$100 million in revenues or higher.”

Respondents: 2015E Median: 134, “At Scale” Median: 130, <$2.5MM Median: 95

Comparison with

Previous Surveys

Very similar results to last

year’s survey.

The median numbers

reflect respondents’

beliefs that the most

operating leverage will

come from

improvements in gross

margin, S&M and R&D.

45

Median Cost Structure by Size (Includes Only Companies with >$2.5MM in ACV)

Note that numbers do not add due to the fact that medians were calculated for each metric separately and independently

(1): Annual Contract Value (ACV) is defined as total annualized recurring SaaS revenues, excluding professional services, perpetual licenses

and related maintenance

Respondents: $2.5MM-$5MM: 21, $5MM-$10MM: 26, $10MM-$15MM: 16, $15MM-25MM: 21, $25MM-$40MM: 12, >$40MM: 52

All Size of Company (ACV)(1)

2014 Respondents $2.5-$5M $5-$10M $10-$15M $15-$25M $25-$40M >$40M

Total Gross Margin 71% 81% 83% 64% 69% 61% 70%

Subscription 79% 83% 83% 74% 76% 77% 76%

Professional Services 15% 32% 17% 23% 14% 0% 15%

Operating Expense Margins:

Sales & Marketing 33% 23% 31% 37% 46% 36% 36%

R&D 25% 28% 26% 31% 29% 26% 22%

G&A 16% 17% 16% 22% 17% 14% 16%

EBITDA Margin (5%) 5% 4% (23%) (13%) (20%) (3%)

46

Total Revenue Run-Rate

~$25MM ~$50MM ~$100MM

Median Values

Gross Margin 63% 64% 67%

Sales & Marketing 47% 44% 44%

Research & Development 23% 19% 19%

G & A 17% 16% 15%

EBIT Margin (29%) (17%) (6%)

FCF Margin (10%) (5%) (2%)

YoY Revenue Growth Rate(1) 120% 67% 44%

For Comparison: Historical Results of Selected

Public SaaS Companies

(1): YoY Revenue Growth compares against previous year’s revenue of the companies at the time

Note: Excludes stock-based compensation (SBC)

Median includes ALRM, AMBR, APPF, ATHN, BCOV, BNFT, BOX, BV, CNVO, COVS, CRM, CSOD, CTCT, CVT, DMAN, DWRE, ECOM,

EOPN, ET, FLTX, HUBS, LOGM, MB, MKTG, MKTO, MRIN, N, NEWR, NOW, OPWR, PAYC, PCTY, PFPT, QLYS, RNG, RNOW, RP, SFSF,

SHOP, SPSC, SQI, TLEO, TXTR, VEEV, VOCS, WDAY, WK, XTLY, YDLE and ZEN

~$25M median excludes BNFT, COVS, CVT, FLTX, PAYC, PCTY, QLYS, RNG, RP, VEEV and WDAY

~$50M median excludes RP and TXTR

~$100M median excludes AMBR, APPF, BCOV, DMAN, DWRE, ECOM, EOPN, MB, MKTO, MRIN, PCTY, QLYS, SPSC, SQI, TXTR and

XTLY

47

33%

24%

28%27%

28%

26%

41%

38%

41% 42%43%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

<10% 10-15% 15-20% 20-25% 25-30% 30-35% 35-40% 40-50% 50-60% 60-80% >80%

Med

ian

2014 S

ale

s &

Mark

eti

ng

Sp

en

d a

s %

of

Rev

en

ue

2014 Growth Rate

Sales & Marketing Spend vs. Growth Rate (Excluding Companies <$2.5MM in Revenue)

Median ≈ 32%

Respondents: <10%: 9, 10-15%: 9, 15-20% : 9, 20-25%: 14, 25-30%: 15, 30-35%: 10, 35-40%: 8, 40-50%: 11, 50-60%: 10,

60-80%: 19, >80%: 19

Comparison with

Previous Surveys

Very similar results to last

year’s survey.

Not surprisingly,

companies which

spend more on sales

& marketing (as a %

of revenue) grew at a

faster rate than those

which spend less. It

is interesting to see a

step function at 35%

growth, and not much

increase in sales &

marketing spend

required for higher

growth rates.

48

CONTRACTING & PRICING

49

12

36

50

24

40

27

18

18

2

0 20 40 60

Less than $1,000

$1k-$5k

$5k-$15k

$15k-$25k

$25k-$50k

$50k-$100k

$100k-$250k

$250k-$1MM

Greater than $1MM

Median Annual Contract Size (ACV) of a Customer

227 respondents

Median ≈ $21K

Comparison with

Previous Surveys

These results are in-line

with previous survey

medians of $21K, $20K

and $24K in 2014, 2013

and 2012, respectively.

The median

initial annual

contract size

(subscription

component only)

for the group was

$21K per year.

50

Monthly36%

Quarterly11%

Quarterly to <1 Year

9%

1 Year43%

1-2+ Years1%

Month to month11%

Less than 1 year10%

1 to 2 years51%

2 to 3 years16%

3 years or more12%

Median / Typical Contract Terms for the Group

Respondents: Average Contract Length: 240, Average Billing Period: 239

Median ≈ 1.5 years Median ≈ 6 months

Average Contract Length Average Billing Period

Comparison with

Previous Surveys

Essentially the same

median contract length as

in the 2014 survey, while

the group has shown

slightly more aggressive

(longer forward) billing

(median of 6 months vs. 3

months last year).

The median

average contract

length is 1.5

years; and the

median billing

term is six

months in

advance.

51

Contract Length as a Function of Contract Size


Comparison with

Previous Surveys

Companies in the

"elephant hunter" group

are booking longer term

contracts. Respondents

with >$250K ACV book

35% of their contracts at 3

years or longer (compared

to only 5% in the 2014

group).

The phenomenon

of longer contract

terms for larger

contracts is

pretty clear.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

<$1k $1k-$5k $5k-$25k $25k-$100k $100k-$250k >$250k

Av

era

ge C

on

tract

Len

gth

Median Contract Value (ACV)

Month to month Less than 1 year 1 to 2 years 2 to 3 years 3 years or more

52

Seats34%

Usage or transactions

24%

Sites8%

Total employees

6%

Databasesize5%

Other23%

What is Your Primary Pricing Metric?

“Other” includes: Data usage, number of apps being tested, email volume, customer devices and amount of content

240 respondents

Comparison with

Previous Surveys

These results are largely

in-line with 2014, 2013

and 2012 results.

53

26

19

15

36

39

0 10 20 30 40

1-3%

4-6%

7-9%

10-15%

> 15%

Annual U

nit C

hurn

Annual Unit Churn(1)

(Excluding Companies <$2.5MM in Revenue)

Median ≈ 10%

(1): Percentage churn of # of paid customers at year-end 2013 that were still customers at year-end 2014

135 respondents

Comparison with

Previous Surveys

This result is slightly

higher than the 2014 and

2013 results of 8%.

Reported median

annual unit churn

(by customer

count) is 10% for

the group.

54

52

39

13

11

13

0 10 20 30 40 50 60

<5%

5-10%

10-15%

15-20%

>20%

An

nu

al G

ross D

olla

r C

hu

rn

Annual Gross Dollar Churn


“What percentage of total ACV on a dollar basis churns in a given year?”(1)

(1): Excluding the benefit of upsells

128 respondents

Median ≈ 7%

Comparison with

Previous Surveys

This result is in the same

range as earlier results

(6% in 2014, 8% in 2013,

5% in 2012).

Median annual

gross dollar

churn (without

the benefit of

upsells) is 7%.

The results were

virtually the same

when including

companies

<$2.5MM in

revenues.

55

8%

12%

7%

4%

3%3%

0%

2%

4%

6%

8%

10%

12%

14%

Month to month 1 year or less 1 to 2 years 2 years 3 years 4+ years

Average Contract Length

Annual Gross Dollar Churn as a Function of

Contract Length


Respondents: Month to Month: 5, Less than 1 year: 30, 1 to 2 years: 49, 2 years: 15, 3 years: 19; 4+ years: 10

Median ≈ 7%

Comparison with

Previous Surveys

Results are consistent

with those from last year;

the exception being

companies using month to

month contracts, which

show significantly lower

churn rates in this year’s

survey (8% vs. 13% in the

2014 survey).

Not surprisingly,

companies with

very long term

contracts (2+

years) have the

lowest annual

dollar churn. As

expected,

companies with

short-term

contracts (<1

year) tend to

experience

higher churn.

56

8.8%9.2%

6.3%

10.8%

7.4%

4.4%

3.1%3.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1 to 2 years 2 years 3 years 4+ years

Contract Length

Non-Renewals Annualized Gross Churn

Close-Up: Annual Non-Renewal Rates(1) vs. Gross Churn

for Companies with Long-Term Contracts


(1) Annual non-renewal rate is based on only contracts up for renewal in a particular year

Respondents: 1 to 2 years: 49, 2 years: 15, 3 years: 19; 4+ years: 10

Non-Renewal

Median for the

LT Contract

Group ≈ 8.3%

The respondent

data would

suggest that

companies with

contract lengths

of greater than

one year actually

experience

equivalent, if not

greater, non-

renewal rates

when only

considering

dollars up for

renewal

compared to its

peers preferring

sub-annual

contracts

57

13%

8%8%

5%

4%5%

0%

2%

4%

6%

8%

10%

12%

14%

<$1K $1K-$5K $5K-$25K $25K-$100K $100K-$250K >$250K

Gro

ss D

olla

r C

hu

rn


Annual Gross Dollar Churn as a Function of

Contract Size



Comparison with

Previous Surveys

Very similar to previous

results.

As contract sizes

increase, gross

dollar churn

generally trended

downwards

(mostly related to

longer term

contracts,

presumably).

58

5%

11%

8%

4%

8%

0%

5%

10%

15%

Field Sales Inside Sales Internet Sales Channel Mixed

Annual G

ross D

olla

r C

hurn

Annual Gross Dollar Churn as a Function of Primary

Distribution Mode


Respondents: Field Sales: 55, Inside Sales: 24, Internet Sales: 4, Channel Sales: 7, Mixed: 38

Median ≈ 7%

Comparison with

Previous Surveys


previous survey results.

Those

companies

employing

primarily field

sales had lower

churn rates than

those employing

primarily inside

sales or mixed

distribution.

59

11

9

8

19

39

30

37

38

29

0 20 40 60

<80%

80-90%

90-95%

95-100%

~100%

100-105%

105-110%

110-120%

>120%

Annual Net Dollar Retention from Existing Customers

Median ≈ 104%

“How much do you expect your ACV from existing customers to change,

including the effect of both churn and upsells?”(1)

100%

+ N

et

Rete

nti

on

(Upsells

gre

ate

r

than c

hurn

)

Net

Ch

urn

(Churn

gre

ate

r

than u

psells

)

(1): We define this as the “net dollar retention rate”

220 respondents

Comparison with

Previous Surveys

Nominally higher than

2014 (103%) and 2013

(101%) and 2 percentage

points lower than 2012

(106%).

The median

annual net dollar

retention rates,

including churn,

but also including

the benefit of

upsells, is 104%.

The result does

not change

materially when

removing the

smallest

companies

(<$2.5MM in

revenue) from

the group (likely

due to longer

contracting).

60

Unit Economic

Leaders

( Subscription GM > 80%; CAC All

< $1.50; and Net $ Retention > 100%) Others

Business and HQ

Vertical 44% 25%

End Customer 44% Enterprise 50% Enterprise

Revenue

Median 2014 Revenue $9MM $23MM

% of Companies >$25MM 17% 47%

Median Growth Rate 31% 35%

Revenue per FTE $138K $151K

Primary Distribution Mode

- Field Sales Dominated 71% 53%

- Inside Sales Dominated 18% 22%

Application Delivery

- 3rd Party Managed (e.g. AWS, Salesforce, etc.) 53% 48%

Median ACV Per Customer $28K $30K

Billing

- % Companies Billing 1 Year or More in Advance 47% 44%

% New ACV from Upsells 26% 19%

Comparison of Unit Economic Leaders to All Other

Companies (Excluding Companies <$5MM in Revenue)

Respondents: Unit Economic Leaders: 18, All Others: 114

Superior unit

economics – high

lifetime value of

customer (LTV)

and low CAC –

are critical

success factors.

We compared

companies with

the strongest

metrics used to

derive LTV and

CAC with

everyone else,

and found some

interesting

patterns.

Comparison with

Previous Surveys

Among the Unit Economic

Leaders we see: smaller

companies, more field

dominated selling, more

vertical market SaaS

companies; smaller

component Enterprise end

customers; and higher

component of upsells.

61

CAPITAL REQUIREMENTS

62

39

17

18

22

29

10 15 20 25 30 35 40 45

Less than $5MM

$5MM to $15MM

$15MM to $25MM

$25MM to $50MM

Greater than $50MM

Equity Capital Raised So Far

Median ≈ $19MM

Respondents; Everybody: 125; >$2.5M: 91

Comparison with

Previous Surveys

Well above the 2014 and

2013 results of $8MM in

raised capital. However,

these results are similar to

the $23MM in capital

raised by participants in

the 2012 and survey.

Companies in the

survey group

have raised a

median of

roughly $19MM

in primary equity

capital so far

(excluding

secondary stock

sales). If we

exclude

companies

<$2.5MM, the

median jumps up

to $32MM.

Median ≈ $32MM (excluding <$2.5MM)

63

Median

Amount No. of 2014 GAAP 2015E

Raised to Date Respondents Revenue Growth

Less than $5MM 35 $2MM 55%

$5MM to $15MM 16 $11MM 31%

$15MM to $25MM 18 $19MM 33%

$25MM to $50MM 22 $20MM 31%

Greater than $50MM 29 $40MM 33%

Analysis of Companies by Equity Capital Raised

120 respondents

Comparison with

Previous Surveys

The 2015 respondents

have much greater

revenue traction per

dollars raised than

previous years’ groups.

64

All Participants Excluding Companies <$2.5MM in Revenue

Years Investment Years Investment

Target Required Required Required Required

$1MM ACV 2 $3MM 2 $3MM

$5MM ACV 3 $6MM 4 $6MM

$15MM ACV 5 $10MM 6 $13MM

$40MM ACV 7 $17MM 8 $24MM

Capital Efficiency Expectations – Median Levels for the

Group

Actual/expected time and investment required to reach:


Comparison with

Previous Surveys

Very similar to 2014 and

2013 survey results.

65

% Using Median Debt Median Debt-to-MRR

2014 Revenue Range Debt(1) Level(2)Ratio

Less than $5MM 15% $1MM 2.0x MRR

$5MM to $10MM 58% $4MM 2.5x MRR

$10MM to $15MM 88% $4MM 3.2x MRR

$15MM to $25MM 90% $8MM 2.9x MRR

$25MM to $40MM 92% $9MM 2.8x MRR

Greater than $40MM 100% $20MM 3.6x MRR

Use of Debt Capital Among Private SaaS Companies

(1) % of companies with at least $1MM of debt

(2) Median among companies with at least $1MM of debt; includes debt outstanding plus availability under existing lines

Respondents: Less than $5MM: 43; $5MM to $10MM: 9; $10MM to $15MM: 8; $15MM to $25MM: 20; $25MM to $40MM: 13; Greater than

$40MM: 22

66

ACCOUNTING POLICIES

67

55%

46% 48%

60%

28%

32%33%

20%

17%21% 19% 20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Whole Group 0-25% 25-75% >75%

Professional Services Attach Rate

Within a week or two of signing Within a month of signing A few months or more after signing

Subscription Revenue Recognition Policies

“When do you typically begin recognizing subscription revenues on a new contract

with a new customer?”

Respondents: 0-25%: 108, 25-75%: 42, >75%: 15

Approximately 55% of

the respondents

indicated that they

begin recognition very

soon (within a week or

two) after signing new

contracts. It’s

interesting to see that

many companies with

significant services

were still able to start

subscription revenue

recognition quickly.

Comparison with

Previous Surveys

Largely unchanged from

previous years’ results.

68

As the services are

provided 68%

Deferred over the expected

life of the customer

6%

Deferred over the term of the

contract26%

Professional Services Revenue Recognition Policies

203 respondents

“What is the predominant mode for recognizing professional services revenues?”

The clear

majority of

respondents

offering

professional

services

indicated that

they recognize

that revenue as

the services are

provided.

69

Deferred recognition

28%

Recognized upfront72%

Sales Commission Cost Recognition Policies

214 respondents

“How do you recognize sales commission costs (deferred or recognized upfront)?”

We also inquired

as to the

recognition of

sales

commission

costs. We found

two-thirds of

respondents

indicating that

they recognize

commission

costs up-front.

Comparison with

Previous Surveys

5% increase in

“recognized upfront” from

last year’s 67%.

70

Subscription Revenue Recognition Professional Services Recognition Sales Commission Recognition

Auditor

Within a week or

two of signing

Within a month

of signing

A few months or

more after signing

As the service

is provided

Deferred over

life of customer

Deferred over

contract term

Deferred

recognition

Recognized

upfront

Deloitte 57% 36% 7% 62% 15% 23% 31% 69%

E&Y 59% 27% 14% 68% 0% 32% 15% 85%

KPMG 59% 27% 14% 57% 0% 43% 30% 70%

PWC 53% 24% 24% 75% 8% 17% 44% 56%

BDO 64% 18% 18% 63% 13% 25% 30% 70%

Other 52% 30% 18% 67% 7% 27% 25% 75%

Total 55% 29% 17% 66% 6% 28% 27% 73%

Accounting Policies Across Selected Accounting Firms

Respondents: Deloitte: 14, E&Y: 24, KPMG: 25, PWC: 18, BDO: 11, Other: 117

71

2011-2015 YTD Software and SaaS IPOs

Rank Firm Deals Value ($MM)

1 Pacific Crest Securities 38 $5,809.5

2 Morgan Stanley 30 5,787.4

3 J.P. Morgan 23 4,316.7

4 Goldman Sachs 21 3,830.4

5 Credit Suisse 21 2,930.4

6 Cannaccord 19 3,135.3

7 Raymond James 18 2,493.2

8 Deutsche Bank 17 2,757.7

9 JMP Securities 17 2,624.8

10 Stifel Nicolaus Weisel 17 2,155.4

11 UBS 14 2,956.2

12 William Blair & Co 14 1,400.5

13 Needham & Co 12 1,183.4

14 Barclays 10 1,733.2

15 RBC Capital Markets 10 1,206.7

16 Bank of America 9 1,270.3

17 Wells Fargo 7 1,856.3

18 Allen & Co 6 1,442.5

19 Piper Jaffray & Co 6 792.3

20 Oppenheimer & Co 6 591.9

21 Cowen & Co 5 1,376.4

22 BMO 5 879.4

23 Citi 4 834.2

24 Lazard Capital Markets 4 446.2

25 First Analysis 3 299.7

has been acquired by

PCS Leadership in SaaS and Software – Selected Recent

Transaction Experience

Corporate Finance Advisory

$100,100,000

MINDBODY(MB)

Initial Public Offering

$150,535,000

Shopify(SHOP)


$201,250,000

Box(BOX)


$115,000,000

Hortonw orks(HDP)


$143,750,000

HubSpot(HUBS)


$114,999,993

Zendesk(ZEN)


$114,626,250

Paycom Softw are(PAYC)


$133,073,876

2U(TWOU)


$110,503,887

Amber Road(AMBR)


$300,035,000

Veeva Systems(VEEV)


$135,240,000

Cvent(CVT)


$732,550,000

Workday(WDAY)


$104,535,000

Qualys(QLYS)


$241,155,000

ServiceNow(NOW)


has been acquired by has been acquired by


has been acquired by has been acquired by has been acquired by

has received an

investment from

has received an

investment from


has divested the

Progress Apama Solution to


has received an

investment from

has been acquired byhas been recapitalized by

$85,560,000

AppFolio(APPF)


72

Disclosures

Important Disclosures:

This report has been prepared by Pacific Crest Securities, a division of KeyBanc Capital Markets Inc., herein known as “PCS”. The material contained herein is based on data from sources considered to be reliable; however, PCS does not guarantee or warrant the accuracy or completeness of the information. It is published for informational purposes only and should not be used as the primary basis of investment decisions. Neither the information nor any opinion expressed constitutes an offer, or the solicitation of an offer, to buy or sell any security. The opinions and estimates expressed reflect the current judgment of PCS and are subject to change without notice. This report may contain forward-looking statements, which involve risk and uncertainty. Actual results may differ significantly from the forward-looking statements. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the specific needs of any person or entity.

Pacific Crest’s specific disclosures can be seen here: http://www.pacific-crest.com/disclosures/

Pacific Crest’s privacy policy can be seen here: http://www.pacific-crest.com/privacy-policy/

Survey respondents participated anonymously and confidentially. Responses were received through online surveys taken in June-July 2015. Pacific Crest cannot verify accuracy of responses. Observations and commentary contained herein relate solely to the survey results and cannot necessarily be applied elsewhere.

About Pacific Crest:

Pacific Crest Securities provides premier investment banking services for technology, operating at the leading edge, where global connectivity is fueling an unprecedented expansion cycle. We apply our knowledge of the drivers of value creation and global network of relationships to technology — high-growth sectors, such as Cloud and big data, SaaS, global internet, mobility, next-gen infrastructure and communications, and industrial and energy technology. As a result, our clients — technology’s foremost institutional investors and market leading companies — rely on us to achieve superior returns and gain competitive advantage from the seismic shifts occurring in technology. Pacific Crest Securities is the technology specialist division of KeyBanc Capital Markets Inc., a FINRA registered broker-dealer. Our sector bankers and transactional specialists collaborate to help clients identify and implement the right course of action, whether a financing, M&A or alternative event. Our software clients include Box, Cvent, Eloqua, ExactTarget, FireEye, Fleetmatics, Guidewire Software, Hortonworks, MindBody, Plex, Proofpoint, ServiceNow, SevOne, Splunk, Tableau Software, Veeva Systems, Workday and Zendesk, among others. Pacific Crest Securities has offices in Boston, Charlotte, New York, Portland, San Francisco, Seattle, Stamford, as well as the Beijing Representative Office and Pacific Crest Securities UK, Ltd, London.

If you have questions or comments, please contact David Spitz, Managing Director:

[email protected]; Twitter @dspitz

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