Pacific Crest 2012 SaaS Survey

7/24/2019 Pacific Crest 2012 SaaS Survey

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2012 Pacific Crest Private SaaS Company Survey Results

See final page for important disclosures


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See final page for important disclosures2

Pacific Crests Private SaaS Company Survey Results

Results analyzed in this report reflect data gathered from 83 private SaaScompany respondents (CEOs and CFOs) in June/July 2012

Purpose provide useful operational and financial benchmarking data tomanagers and investors in SaaS companies

Broad diversity of companies:

$0-$60M+ in revenues (~$18M median)

25-250+ employees (~136 median)

10-2,000+ customers (~600 median)

$100s to $MMs median annual contract value (~$24K median)

Primarily U.S. headquartered

Only partial overlap in names from our 2011 survey, which asked many of thesame questions

28% of this years group participated in 2011; the other 72% were new respondents.This years group included more larger companies (median revenue was $13M lastyear), but selling smaller sized contracts ($24K median annual contract value vs. $38Klast year)

In our commentary, we analyze results from this survey standalone, whileintermittently comparing results from our 2011 survey


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Growth Rates


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How Fast Did / Will You Grow GAAP Revenues?

Median 2011 GAAP Rev Growth 40%

Median 2012E GAAP Rev Growth 38%

Median 2011 GAAP Rev Growth 40%

Median 2012E GAAP Rev Growth 38%

68 respondents

While 40%growth is themedian, growthrates andexpectationsclearly do not fitthe standard bellcurve.

1

7

18

11 11

7

12

0

8

17

16

7 7

13

0

5

10

15

20

100%

NumberofCompanies

2011 Revenue Growth 2012E Revenue Growth

Comparison with 2011Survey

Identical median historicalgrowth vs. last year(40%). More conservativeoutlook (38% vs. 44% lastyear). Median 2011 Revenue $18M


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Median Growth Rate as a Function of Contract Size

Number of respondents: $1M = 2Median ACV is the median annual contract value of a customer, excluding professional services

Companies withlowest ASPs aregrowing the fastest(though the data issparse). In oursample group, thoseselling in the $25k-$250k range aregrowing 15 pointsbelow the median.

38%34%

25% 26%

45% 45%

>100%

0%

25%

50%

75%

100%

$1M

Median Contract Size (ACV)

2011G

rowthRate

Median 40%


Markedly lower growth forthe middle tiers ($25k-$100k and $100k-$250k)in this years results,which were 41% and 38%respectively, last year.


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38%39%

38%

29%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Field Inside Internet Channel

Primary Mode of Distribution

20

11GrowthRate

6

Median Growth Rate as a Function of Sales Strategy

Companies usingfield sales astheir primarymode ofdistribution aregrowing slower.(1)

(1): Note that certain respondents who filled in growth rates did not answer the distribution mod question, skewing the medians of those categories belowthe 40% overall medianNumber of respondents: Field = 33, Inside = 13, Internet = 8, Channel = 4


Very similar results to lastyear.


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Comparison of Fast Growers vs. Slower Growers

(1) Slower growers include companies with 2011 growth 30%; 37 respondentsMedian contract size looks at average contracts across all customers

The fastestgrowers tend tobe: (1) skewedmore to SMB;(2) have lowerASPs; (3) spendmore on CAC;and (4) losemoney, incomparison withthe slowergrowers.

Slower Growers(1)

Faster Growers(2)

Median Values for Both Groups

Growth

2011 GAAP Revenue Growth 24% 80%

Target Customer

Enterprise 71% 52%

SMB 29% 39%

Contracts

Average Contract Length 1.7 years 1.5 years

Median Contract Size (ACV) $50K $20K

Sales & Marketing

Median S&M Spending 24% 42%

Median CAC $0.70 $0.93

Profitability

2012E EBITDA Median 11% (22%)

2012E FCF Median 9% (15%)


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Go-to-Market


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(1): Denotes respondents who stated a majority of new ACV bookings to be sold through that mode of distribution66 respondents

Field sales is themost popularmode ofdistribution forthe surveyedgroup, with 53%of respondentsusing it as theirprimary mode ofselling; 20% usedinside sales astheir primarymode; 14%Internet.

0

5

10

15

20

25

30

35

40

Field Sales Inside Sales Internet Sales Channel Sales Mixed


Numb

erofCompanies

75%-100% 50%-75%

(1)


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Primary Mode of Distribution as a Function of Median Contract Size

Median contract size looks at initial contract sizeNumber of respondents: $1M = 2

As expected,companies withlarger ASPs tendto rely moreheavily on fieldsales.Nonetheless,field sales is stillactively usedeven bycompanies in the$5K-$25K ACVgroup.

8% 6% 9%

50%

8%

44%

64%

100% 100%

50%

33%

33%

27%

50%

17%

0%

10%

20%

30%40%

50%

60%

70%

80%

90%

100%

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


Channel Field Inside Internet


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CAC: How Much Do You Spend for $1 of New ACV from a New Customer?

Median $0.90

(1): Customer Acquisition Cost is the estimated, fully-loaded sales and marketing expense required over multiple periods to acquire $1 of new ACV from a newcustomer.Number of respondents : $2.00 = 5

Respondentsspent a medianof $0.90 for eachdollar of newACV from a newcustomer.(1)

15

9

9

10

2

5

1

4

0 2 4 6 8 10 12 14 16

Less than$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


Inline with last year'smedian of $0.93.


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CAC on New Customers vs. Upsells vs. Renewals

60 respondents

In our sampleset, the mediancost to upsell anexisting customeris just 20% of thecost of new

sales. Renewalsare 10%.

$0.90

$0.18

$0.09

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

New ACV from NewCustomer

Upsell to Existing Customer Renewals


These upsell and renewalcosts are markedly downfrom last year's $0.28 forupsells and $0.16 forrenewals.


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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Field Sales Inside Sales Internet Sales

Less than $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

13

CAC Spend by Primary Mode of Distribution(1)

Median $0.83

(1): CAC for $1 new ACV from a new customerNumber of respondents : Field Sales = 28, Inside = 13, Internet = 7

Median $0.88

Median $1.06

Surprisingly,amongrespondents, themedian CAC forfield sales isslightly below the

CAC for insidesales. Internetsales is thehighest.


Last year's results betterreflected conventionalwisdom, with field, insideand internet at $1.00,$0.90 and $0.45,respectively


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4%

8%

25%

16%14%

18%15%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Less than

$2MM

$2MM-$5MM $5MM-

$10MM

$10MM-

$15MM

$15MM-

$25MM

$25MM-

$40MM

$40MM-

$60MM

Greater than

$60MM

14

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

Overall Median

14%

Number of respondents: $40M-60M = 5, >$60M = 6

Median 14%

Size of Company (ACV)

The medianrespondent gets14% of new salesfrom upsells; thelargest companiesin the group rely

more heavily onupsells.


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1

1

3

2

6

9

8

15

9

0 5 10 15 20

50%

27

11

8

5

3

4

1

0 10 20 30

0-10%

10-25%

25-50%

50-75%

75-100%

100-150%

150-200%

15

Professional Services Impact on Go-To-Market

Professional Services as a % of 1st Year ACV Professional Services Gross Margin

Median 14%

Median 22%

59 respondents

Professionalservices play aminor role formost of thegroup,accounting for

14% of first yearcontract value forthe medianrespondent.


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Freemium / Try Before You Buy

Try Before You Buy StrategiesFreemium Strategies

Expected New ACV in 2012 from TryBefore You Buy Leads

Expected New ACV in 2012 fromFreemium Leads

62 respondents

Althoughfreemium andTBYB are still notused at all bymanyrespondents, fully

one-third ofcompanies are atleast exploringfreemium, andover half areexploring "trybefore you buy".

None

45%

0-10%28%

10-50%10%

>50%18%

None68%

0-10%21%

10-25%5%

>25%5%


These numbers aregenerally up from lastyear. For example, twiceas many companies aslast year said TBYBgenerated over 50% oftheir leads.


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Sales Commissions

Sales Commission (As % of ACV)

1757 respondents

We looked atsalescommissions forthe first time thisyear, and found avirtual step

function at the 7%commission leveland a long righttail on the highend of thedistribution, with a9.5% median.

Median Commission Paid: 9.5%

3 3

17

16

10

8

0

5

10

15

20

0% 1-2% 3-4% 5-6% 7-8% 9-10% 11-14% 15+%

#ofRespondents


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16%

8%

11%

10% 9%8%

4%

0%

4%

8%

12%

16%

20%

$1M

Sales Commission as a Function of Median Contract Size


18

Median contract value looks at initial contract sizeNumber of respondents: $1M = 2

Sorted by mediancontract value,there appears tobe a large stepfunction at ASPsbelow $1K. At the

high ASP end(over $1M),commission ratesdrop considerably,not surprisingly.

MedianSale

sCommission

Median 9.5%


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Margin and Cost Structure by Sales Commission

19

(1): Bottom Third Commission Payers defined as respondents who paid 0-8% commissions for new sales of new ACV (24 total)(2): Top Third Commission Payers defined as respondents who paid 11%+ commissions for new sales of new ACV (18 total)Median contract size examines average contracts across all customers

Median Values for Each Group

Commission % 7% 14%

Size of Company (ACV) $21M $9M

Median Contract Size (ACV) $72K $18K

Sales & Marketing Cost (% of Revenues) 27% 33%

CAC $0.88 $1.00

% Sold through Field Sales 83% 21%

% Sold through Inside Sales 10% 54%

Revenue Growth 28% 45%

Bottom Third

Commission Payers(1)

Top Third Commission

Payers(2)


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Commission For Renewals, Upsells and Multi-Year Deals

20

(1): Same rate (or higher) than new sales54 respondents

Not surprisingly,commissions onrenewals aretypically deeplydiscounted, withone-third of

respondentspaying nocommission onrenewals at all.Upsells, on theother hand, moreoften than notgenerate fullcommissions.

Upsells

Median Commission

Rate 8%

% of RespondentsPaying Full

Commission(1)

56%

Renewals

Median Commission

Rate 2%

% of RespondentsPaying 0%

35%

% of RespondentsPaying 1-2%

25%

No AdditionalCommission

47%

Nominal Kicker 20%

Full Commission 16%

% of Respondents Paying:

Additional Commission

for Extra Years on Initial Contract


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Cost Structure


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Anticipated Cost Structure at Scale(1)

(1) Note: Survey describes scale as "e.g.", $50 million in revenues or higher.68 respondents

Gross Margin

Operating Expense Margins:

Sales & Marketing

R&D

G&A

EBITDA

FCF

Growth Rate 28%

3%

40%

3% 19%

19%

29%

24%

14%

24%

18%

12%

2012E Median Target Model

71% 78%

The mediannumbers reflectthe most operatingleverage fromimprovements incost of sales

(gross margin)and R&D(surprisingly, moreso than reductionsin the sales &marketingexpense rates).


These numbers aresimilar to last year's,although last year S&Mstarted off a higher base.


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Median Cost Structure by Size

52 respondents; $40M = 12

Other than for thesmallest group(


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Comparison: Historical Results of Selected Public SaaS Companies

(1): YoY Revenue Growth compares against previous years revenue of the companies at the timeMedian includes ATHN, BCOV, BV, CNVO, CSOD, CTCT, DMAN, DWRE, ET, LOGM, MKTG, N, NOW, PFPT RP, RNOW, SQI, SPSC, CRM, SFSF, TLEO and VOCS~$25M median excludes RP~$50M median excludes RP~$100M median excludes BCOV, DMAN, DWRE, PFPT, SPSC and SQI

Median Total Revenue Run-Rate

~$25M ~$50M ~$100M

Gross Margin 63% 66% 66%

Sales & Marketing 48% 46% 45%

Research & Development 23% 18% 16%

G & A 15% 14% 14%

EBIT Margin (25%) (11%) (1%)

FCF Margin (7%) (1%) 3%

YoY Revenue Growth Rate(1) 104% 59% 39%

Historical Results of Public SaaS Companies

Compared with areference group ofhistorical results ofnow public SaaScompanies,survey

respondents arespending less onsales & marketingbut also growingmore slowly.


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25%23%

38%

43% 43%

48%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0% to 15% 15% to

30%

30% to

45%

45% to

60%

60% to

100%

> 100%

2012E Growth Rate

MedianSales&MarketingS

pend

25

Sales & Marketing Spend vs. Projected Growth Rate

Median(2) 29%

(1) As a percentage of GAAP revenues projected for 2012E(2) Bar reflects median sales & marketing spend across all companies50 respondents; 0-15% = 6, 15-30% = 14, 30-45% = 10, 45-60% = 6, 60-100% = 5, >100% = 9

(1)

Not surprisingly,respondentsprojecting thehighest rates ofgrowth arespending the most

on sales &marketing.


The dispersion betweenfaster and slower growerswas more significant andclear this year, versus2011s results.


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Contracting & Pricing


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Median $24K

27

Median Annual Contract Size (ACV) per Customer

60 respondents; average contract size across all customers


This years groupincluded more companieswith lower pricedsolutions, bringing theASP down to $24k,versus $38k in the 2011survey.

4

8

15

17

7

9

0 5 10 15 20

< $1K

$1K-$5K

$5K-$25K

$25K-$100K

$100K-$250K

$250K-$1M


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Median/Typical Contracts for the Group

63 respondents

Billing TermsAverage Contract Length

Month to month11%

Less than 1 year9%

1 to 2 years48%

2 to 3 years11%

3 years or more21%

Median 1.7 Years Median 11 Months

Monthly, 32%

Qtrly, 10%

Qtrly to


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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$1M


Avera

geContractLen

gth

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

29

Contract Length as a Function of Contract Size

Median contract size looks at initial contractNumber of respondents: $1M = 2

The phenomenonof longer contractterms for largercontracts is clear.In fact, virtually allrespondents with

an ASP over $5khad 1+ yearcontracts.


Median contract lengthswere longer across theboard versus 2011sresults.


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What is Your Primary Pricing Metric?

Other pricing metrics include: revenue under management and modules / features used62 respondents

Seats, 38.7%

Sites, 1.6%

Total employees,9.7%Database size, 1.6%

Usage ortransactions, 30.6%

Other, 17.7%


These results werevirtually identical to lastyears.


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Annual Renewal Rates

Median 93%

60 respondents

What percentage of your contracts up for renewal in a given year renew ($ basis)?

1

0

1

3

5

6

20

24

0 5 10 15 20 25 30

< 50%

50-60%

60-70%

70-80%

80-85%

85-90%

90-95%

95-100%

93% annualrenewal rates ondeals up forrenewal shouldnot be mistakenfor 7% churn,

since manycompanies havelonger termcontracts.


The 93% median annualrenewal rate amongexpiring contracts was 6points higher than lastyears survey results.


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Gross Churn

Median 5%

(1): Excluding the benefit of upsells (which we define as gross churn)Gross churn is the percentage of ACV from existing customers that is expected to be lost on a one year period due to non-renewals, not taking into account thebenefit of upsells or increased usage58 respondents

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

Median grosschurn rates (seedefinition below)amongrespondentsappear to be very

low (again). Only8 of the 60respondents hadannual grosschurn rates over10% and only 5indicated grosschurn rates over15%.


The median gross churnof 5% is the same as lastyears result, despitedifferences on theprevious page

30

20

3

3

2

0 5 10 15 20 25 30 35

20%


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8%

13%

6%

3%

1%

0%

2%

4%

6%

8%

10%

12%

14%

Mo.-to-Mo. < 1 yr 1-2 yrs 2-3 yrs 3+ yrs

33

Gross Churn as a Function of Contract Length

58 respondents. Number of respondents in each group: Month to Month = 7; 3 yrs = 11

Median 5%

With theexception of therespondents withmonth-to-monthcontracts, thelonger the

contracts thelower the churn.The month-to-month results aresurprising.

Contract Length


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15%

8%

6%

6%

2%

1%

0%

4%

8%

12%

16%


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3%

6%

8%

2%

8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Field Sales Inside Sales Internet Sales Channel Sales Mixed

35

Gross Churn as a Function of Primary Distribution Mode

Median 5%

57 respondents. Number of respondents in each group: Field = 27, Inside = 11, Channel = 4, Internet = 7, Mixed = 8

Respondentsdeployingprimarily fieldsales sign largerdeals with longerterms, and thus

have lower grosschurn.



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4

6

5

26

11

5

6

0 5 10 15 20 25 30

< 90%

90-95%

95-100%

~100%

100% - 105%

105% - 110%

> 110%

No. of Companies

36

Net Renewal From Existing Customers

Median 106%

(1): We define this as the net renewal rate63 respondents

How much do you expect your ACV from existing customers to change, includingthe effect of both churn and upsells?(1)

100%+NetRenewal

(Upsellsgr

eaterthan

chu

rn)

NetChurn

(Churngreat

er

thanupsells

)

Accounting forthe benefit ofupsells,respondentsexpect theexisting base to

grow at medianrate of 6%annually.





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Capital Efficiency



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Capital Raised So Far

Median $23M

62 respondents

17

7

8

18

12

0 5 10 15 20

< $5MM

$5MM to$15MM

$15MM to$25MM

$25MM to$50MM

> $50MM

Mostrespondentshave hadreasonablystrong fundinghistories.



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Analysis of Companies by Capital Raised

60 respondents

Median

Amount

Raised to

Date

No. of

Respondents

2011 GAAP

Revenue 2012E Growth

< $5M 17 $4M 34%

$5M-$15M 7 $8M 80%

$15M-$25M 8 $15M 36%

$25M-$50M 16 $35M 38%

> $50M 12 $33M 50%


This year we had morecompanies who haveraised less money (28%raised


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p y y


Years Investment

$1M ACV 2 $4M

$5M ACV 3 $7.7M

$15M ACV 5 $15M

$40M ACV 7 $23M

Actual/expected time and investment reqd to reach:

ACV at which you expect to be FCF+: ~$23M

40

Capital Efficiency Expectations Median Levels for the Group

(1) (1)

(1): Median59 respondents





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Exits



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2-Year Horizon on Exit Scenarios

63 respondents

2012 Survey2011 Survey

58 respondents

M&A Likely

26%

Exit Not

Likely

41%

Either is

Likely

5%

IPO Likely

28%

M&A Likely

33%

Exit Not

Likely

46%

Either is

Likely

5%

IPO Likely

16%



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Expectations Regarding M&A Purchases Within the Next Year

62 respondents

2012 Survey2011 Survey

Larger

Acquisition5%

Neither is

Likely

76%

Small Tuck-In19%

Small Tuck-In

32%

Larger

Acquisition

4%

Neither is Likely

64%

57 respondents



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CORPORATE FINANCE M&A AND PRIVATE PLACEMENTS

$155,595,000

RealPage(RP)

Initial Public Off ering

$53,123,733

Convio

(CNVO)


$124,085,000

SuccessFactors

(SFSF)Initial Public Off ering

$66,000,000

DemandTec

(DMAN)Initial Public Off ering

$105,800,000

Eloqua(ELOQ)

Initial Public Offering

$70,312,500

E2open(EOPN)


$130,900,000

Bazaarvoice(BV)

Follow- on Offering

$381,535,262

SplunkL

Follow -on Offering

$241,155,000

ServiceNow(NOW)


$93,982,473

Proofpoint(PFPT)


$138,000,000

In o ox(BLOX)


$263,925,000

Splunk(SPLK)

Initial Public Offe ring

$185,725,000

ExactTarget(ET)


$130,883,292

Bazaarvoice(BV)


$63,250,000

Brightcove(BCOV)


$132,307,500

Guidew ire

Initial Public Offe ring

$91,351,224

Responsys(MKTG)


$156,975,000

Cornerstone OnDemand(CSOD)


$65,550,000

SciQuest(SQI)


$103,500,000

Imperva(IMPV)


has been acquired by

has been ac quir ed by has been r ec apitaliz ed by

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


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

Private Placement

has been acquired by has been acquired by


has acquired has been acquired by Leveraged recapitalization by



44

Pacific Crest Leadership in Software - Selected Transaction Experience


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Pacific Crest 2012 SaaS Survey

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Transcript of Pacific Crest 2012 SaaS Survey