Pacific Crest 2013 SaaS Survey
Transcript of Pacific Crest 2013 SaaS Survey
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2013 Pacific Crest Private2013 Pacific Crest Private
SaaS Company SurveySaaS Company SurveyResultsResults
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Pacific Crest 2013 Private SaaS CompanySurvey: Summary of Results
This presentation provides a summary and analysis of the results of a survey whichPacific Crests investment banking software team conducted in June-July 2013
Represents the fourth such survey Pacific Crest has done
The survey included executives from 155 private SaaS companies, twice as many as participatedin 2012 and 2011
Much of the increase in participants came from smaller / younger companies, which we welcomebut which we also needed to be cognizant of when analyzing results
Broad diversit of SaaS com anies artici ated:
$0-$60MM+ in revenues ($5MM median)
25-250+ employees (50 median)
10-2,000+ customers (190 median)
$100s to $MMs median annual contract value ($20K median)
Participants from around the world, although primarily U.S.
Our goal is to provide useful operational and financial benchmarking data tomanagers and investors in SaaS companies
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58
30
35
40
45
50
55
60
ompanies
Survey Participant Revenue Distribution
Median $5MMWhile we hadalmost twice asmanyparticipants in2013, most of theincrease camefrom companieswith less than$2MM inrevenues.
18 20
10
15
11 11
5 4
0
5
10
15
20
Less than$2MM $2MM-$5MM $5MM-$10MM $10MM-$15MM $15MM-$25MM $25MM-$40MM $40MM-$60MM $60MM-$100MM Greater than$100MM
Numbero
fC
2012 Revenue
152 respondents
3
Comparison withPrevious Surveys
Companies with
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Survey Participant Geography (HQ)
For the first time,we askedparticipants toprovideinformation onwhere theircompanies areheadquartered.
US Regions
North California Silicon Valley 33
Southern California 8
Boston / New England 18
Pacific Northwest 5
New York Metropolitan Area 11
Washington DC 3
Southeast U.S. 9
Midwest / Chica o 12
1
2
119
16
2
4
Colorado / Utah 7
Texas 5
Other U.S. 8
TOTAL: 119
Other RegionsAsia 1
Europe 16
Middle East / Africa 2
Latin America 2
Australia / New Zealand 4
144 respondents
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How Fast Did / Will You Grow GAAP Revenues?
Median 2012 GAAP Rev Growth 41%
Median 2013E GAAP Rev Growth 47%
30
41
2726
35
30
35
40
45
panies
Historicalrevenue growthrates for thegroup arecentered justover 40%, whilethe medianprojected growthis 47% for 2013.
147 and 141 respondents, respectively
5
19
11
17
0
16 16
21
0
5
10
15
20
< 0% 0%-15% 15%-30% 30%-45% 45%-60% 60%-100% > 100%
NumberofC
o
2012 Revenue Growth 2013E Revenue Growth
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Comparison withPrevious Surveys
Very similar historicalgrowth rates as 2012survey, but moreoptimistic about forecast.
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How Fast Did / Will You Grow GAAP Revenues?(Excluding Companies 100% growthcomes from thelarge number ofsmall companies.Excludingcompanies with 100%
Numbero
f
2012 Revenue Growth 2013E Revenue Growth
more traditionalbell curvecentered in themid 30%s.
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Median Growth Rate as a Function of Size of Company
Median 41%
Looked at moredirectly, it's clearthat the smallestcompaniesexperienced thehighest growthrates.
89%
41%
50%
75%
100%
rowthRate
Respondents: $60MM: 8
8
34% 34%
21% 23%
0%
25%
Less than
$2MM
$2MM-$5MM $5MM-
$10MM
$10MM-
$15MM
$15MM-
$25MM
$25MM-
$40MM
$40MM-
$60MM
Greater than
$60MM
2012RevenueG
2012 GAAP Revenue
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25%
34% 34%
27%25%
27%
20%
30%
40%
12GrowthRate
Median Growth Rate as a Function of Contract Size(Excluding Companies
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44%
90%
80%
50%50%
60%
70%80%
90%
100%
rowthRate
Median Growth Rate as a Function of Sales Strategy
Median41%
Across the entiregroup,companies whichmainly useinternetdistribution arerealizing thehighest growthrates.
26%
0%
10%
20%
30%
40%
Field Sales Inside Sales Internet Sales Channel Sales Mixed
2012
G
Primary Mode of Distribution(1)
(1): Primary Mode of Distribution At least 50% of new ACV bookings from new customers in 2013E come from designated distribution channelRespondents: Field 47, Inside 39, Internet 21, Channel 4, Mixed 15
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50%
60%
70%
80%
90%
100%
rowthRate
Median Growth Rate as a Function of Sales Strategy(Excluding Companies
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Median Growth Rate as a Function of TargetCustomer(1)
Median Revenue Growth 41%
Median Revenue Growth (excl.
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Primary Mode of Distribution
Field salesremains the mostpopular way tosell, with 37% ofparticipantsemploying it as
their primarymode ofdistribution (51%if we excludecompanies with
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Primary Mode of Distribution as a Function ofMedian Initial Contract Size
92%100%
54%
25%48%
13%5%
50%
60%
70%
80%
90%
100%
Channel Field Inside InternetAs expected,companies withlarger mediancontract sizestend to rely moreheavily on field
sales.
Note: Initial ACV of a contract
Respondents: $250K: 8
15
4% 8%14%
29%
70%38%
0%
10%
20%
30%
40%
< $5k $5K-$25K $25K-$100K $100K-$250K >$250K
Median Contract Size (ACV)
Comparison with
Previous Surveys
We found much heavieruse of inside sales amongcompanies in the mid-tier
in this survey, 54% ofrespondents in the $5-25kgroup used inside salesvs. only 33% in 2012.
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4
7
6
2
$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 NewACV from a New Customer?
(Excluding Companies
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CAC on New Customers vs. Upsells vs. Renewals(Excluding Companies
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Median CAC on New Customers vs. Upsells vs. Renewals(Companies
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What Percentage of New ACV is from Upsellsto Existing Customers?
Median 13%
The medianrespondent gets13% of new ACVsales fromupsells; thelargest
companies relymore heavily onthis "land andexpand"phenomenon.
15% 16%
25%
22%
15%
24%
32%
15%
20%
25%
30%
35%
VfromU
psells
Respondents: $60MM: 6
20
Comparison withPrevious Surveys
Consistent with our 2012survey results.
5%
0%
5%
10%
Less than$2MM
$2MM-$5MM
$5MM-$10MM
$10MM-$15MM
$15MM-$25MM
$25MM-$40MM
$40MM-$60MM
Greaterthan
$60MM
%N
ew
A
2012 GAAP Revenue
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25%
15% 15% 15%
30%
15%
25%
35%
18%
35% 35%
15%
20%
25%
30%
35%
40%
CVfromUpsells
Are the Fastest Growing Companies RelyingMore on Upsells?
Median 13%
When we divideour respondentpool by growthrate, we find thatthe top growersin each size
class generallyupsell more thanthe slowergrowers.
What Percentage on New ACV are from Upsells to Existing Customers?
5%
10% 10%
6%
0%
5%
10%
Less than$2MM
$2MM-$5MM
$5MM-$10MM
$10MM-$15MM
$15MM-$25MM
$25MM-$40MM
$40MM-$60MM
Greaterthan
$60MM
%New
2012 GAAP Revenue
Respondents: $60MM: 6
21
= Bottom 50% Growers= Top 50% Growers
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4
2
3
2
50-75%
75-100%
100-150%
150-200%
Professional Services Impact on Go-to-Market(Excluding Companies 50%
Median29%
Professionalservices play aminor role formost of thegroup, with themedian company
booking P.S.revenuesequivalent to11% of first yearcontract value.P.S. margins arein the high 20s%.
41
18
14
0 10 20 30 40 50
0-10%
10-25%
25-50%
84 and 65 respondents, respectively
Median 11%
22
2
5
1
1
0 5 10 15 20 25 30
< (50%)
(25%)-(50%)
(15%)-(25%)
(5%)-(15%)
excluded
companies with
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15%
21%
15%
20%
25%
rACV
Professional Services (% of 1st Year ACV) as aFunction of Target Customer
(Excluding Companies
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18
24
15
12
75-80%
80-85%
85-90%
> 90%
Subscription Gross Margins
Median 79%
What is your gross profit margin on just subscription/SaaS revenues?
Mediansubscriptiongross marginsare 79% for thegroup. Note that,
while notdepicted here,the result doesnot changematerially whenremoving thesmall companiesfrom the rou .
7
1
3
9
6
0 10 20 30
< 50%
50-55%
55-60%
60-65%
65-70%
-
109 respondents
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None
> 50%31%
0-10%
10-25%5%
> 25%6%
Freemium / Try Before You Buy
Freemium
Expected New ACV in 2013 fromFreemium Leads
Try Before You Buy
Expected New ACV in 2013 fromTry Before You Buy Leads
Approximately25% ofcompanies makeuse of freemiumin some way,although very
little newrevenues arederived here.Try Before YouBuy is muchmore commonlyused: two-thirds
0-10%14%
10-50%19%
None75%
14%
124 and 137 respondents, respectively
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use it and many
of those derivesignificantrevenues from it.
Comparison withPrevious Surveys
Very consistent resultswith previous years.
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22
28
16
20
25
30
spondents
Sales CommissionsMedian Commission Paid 9%
Median salescommission ratefor the group is9%.
5
1013
8
10
3
0
5
10
15
0-1% 1-3% 3-5% 5-7% 7-9% 9-11% 11-13% 13-15% 15+%
Numberof
Re
Sales Commission (As % of ACV)
115 Respondents
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Comparison withPrevious Surveys
Consistent with 2012results.
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13
10
15
pondents
Field Inside
Sales Commissions by Sales Strategy
Inside Median Commission Paid 9%
The surveyresults indicatethat there is not asignificantdifference insales
commissionspaid by go-to-market strategy.
Field Median Commission Paid 9%
6
5
4
6
2 2
6
2
3
2
5
4
5
1
4
0
5
0-1% 1-3% 3-5% 5-7% 7-9% 9-11% 11-13% 13-15% 15+%
NumberofRe
Sales Commission (As % of ACV)
Field 44 respondents; Inside 26 respondents, excludes companies with revenues
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6%
10%
11%
8%
9%
8%8%
12%
alesCommissio
n
Sales Commissions as a Function of MedianContract Size
Median 9%
We weresurprised to seevery littlerelationshipbetween salescommission rates
and averagecontract sizes(except at thevery low end).
0%
4%
< $1K $1K-$5K $5K-$25K $25K-$100K $100K-$250K >$250K
Median
Median Contract Size (ACV)
Respondents: $250K: 10
28
Comparison withPrevious Surveys
In 2012, we saw thehighest commission ratesfor the
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Upsells
Median Commission
Rate
6%
% of Respondents
Paying Full
Commission(1)
55%
Renewals
Median Commission
Rate
2%
% of RespondentsPaying 0-1%
35%
No Additional
Commission 24%
Nominal Kicker 12%
Full Commission 17%
Additional Commission
for Extra Years on Initial Contract
% of Respondents Paying:
Commissions for Renewals, Upsells and Multi-Year Deals
Not surprisingly,commissions onrenewals aretypically deeplydiscounted, witha median rate of2%. Upsellscommand amedian rate of6%, althoughroughly half ofthe companiespay fullcommissions on
(1) Same rate (or higher) than new sales commissionsRespondents: Renewals: 106, Upsells: 105, Extra Years on Initial Contract: 98
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upsells.
Comparison withPrevious Surveys
Very similar results to2012. The biggestchange is in the thirdcolumn, analyzingcommissions on multi-year deals. In the 2013
survey, only 24% ofrespondents paid noadditional commissions onthe additional years; in2012 almost half of theparticipants paid noadditional commissions.
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Cost Structure(Excluding Companies
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For Comparison: Historical Results of SelectedPublic SaaS Companies
Total Revenue Run-Rate
~$25MM ~$50MM ~$100MM
Median Values
Gross Margin 63% 65% 65%
Sales & Marketing 48% 45% 45%
Research & Development 23% 20% 17%
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(1): YoY Revenue Growth compares against previous years revenue of the companies at the timeMedian includes ATHN, BCOV, BV, CNVO, CRM, CSOD, CTCT, DMAN, DWRE, ECOM, EOPN, ET, FLTX, LOGM, MKTG, MKTO, MRIN, N, NOW, PFPT,QLYS, RNOW, RP, SFSF, SPSC, SQI, TLEO, VOCS and WDAY~$25M median excludes FLTX, QLYS, RP and WDAY~$50M median excludes RP~$100M median excludes BCOV, DMAN, DWRE, ECOM, EOPN, MKTO, MRIN, QLYS, SPSC and SQI
G & A 17% 14% 13%
EBIT Margin (26%) (10%) (3%)
FCF Margin (7%) (1%) 1%
YoY Revenue Growth Rate(1) 105% 62% 38%
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23%
28% 28%
31%
28% 28%
25%
30%
35%
40%
45%
50%
gSpendas%o
fRevenue
Sales & Marketing Spend vs. Projected Growth Rate(Excluding Companies 100%
Me
dianSales&Mark
eti
2013E Growth Rate
Respondents: 0 -15%: 11, 15-30% : 20, 30-45%: 16, 45-60%: 10, 60-100%: 5, >100%: 5
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others. (Note that
the smallestcompanies skewresults due to moreinflated growth andwere thus removedfrom this analysis).
Comparison withPrevious Surveys
In the 2012 and 2011surveys we saw theconventionally expectedcorrelation, with higherS&M spend leading tohigher growth rates.
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22
11
10
1
$25K-$100K
$100K-$250K
$250K-$1M
> $1M
Median Annual Contract Size (ACV) perCustomer
The medianannual contractsize (subscriptioncomponent only)for the group was$20k per year.
14
17
26
0 5 10 15 20 25 30
< $1K
$1K-$5K
$5K-$25K
101 respondents
Median $20K
36
Comparison withPrevious Surveys
As expected, with theincrease in smaller-sizedparticipants, this waslower, with the 2012survey at $24k and the2011 survey at $37.5k.
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Contract Length as a Function of Contract Size
60%
70%
80%
90%
100%
ntractLength
Month to month Less than 1 year 1 to 2 years 2 to 3 years 3 years or moreThe phenomenonof longer contractterms for largercontracts ispretty clear.
Respondents: $250K: 11
0%
10%
20%
30%
40%
50%
$250K
Averag
eC
Median Contract Value (ACV)
38
Comparison withPrevious Surveys
We did see more use ofshorter contract lengthsthan in previous surveys e.g., roughly 30% ofcompanies in the $5-$25kgroup used month-to-month or less than oneyear contracts (vs. none in2012). Even somecompanies in the"elephant hunter" groupshad shorter contracts.
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What is Your Primary Pricing Metric?
Seats, 37.7%
Other, 17.5%
Other includes: Data usage, number of apps being tested, email volume, customer devices and amount of content110 respondents
Sites, 7.9%
Total employees,5.3%
Database size,3.5%
transactions,
28.1%
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Comparison withPrevious Surveys
These results are virtuallyidentical to 2012 and2011.
G C
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7
11
15-20%
>20%
Annual Gross Dollar Churn(Excludes Companies
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6
15
17
7-9%
10-15%
> 15%
Annual Unit Churn(1)
(Excludes Companies
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8% 8%
9%
6%
7%
8%
9%
10%
Annual Gross Dollar Churn as a Function of ContractLength(Excludes Companies
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Size(Excludes Companies $250K)have the lowestchurn, and thosewith the smallest
deal sizes havethe highestchurn. However,churn rates in thebroad middlerange, forcompanies with
18%
9%
13%13%
10%
12%
14%
16%
18%
20%
Churn
Note: median line indicates median gross churn across all respondents as comparisonRespondents: $250K: 9
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sizes between
$1k and $250k,dont show muchof an explainablepattern.
Comparison withPrevious Surveys
Lack of correlation in thebroad middle ranges wasnot the case in 2012 or2011.
8%
2%
0%
2%
4%
6%
8%
$250K
G
ros
Median Contract Size (ACV)
Annual Gross Dollar Churn as a Function of Primary
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6%
9% 9%
6%
8%
10%
yDistribution Mode(Excludes Companies
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14
16
23
~
100%-105%
105%-110%
> 110%
Annual Net Dollar Retention From ExistingCustomers
Median 101%
How much do you expect your ACV from existing customers to change,including the effect of both churn and upsells?(1)
The medianannual netretention rates,including churnbut also includingthe benefit of
upsells, is 101%.
15
6
6
0 5 10 15 20 25
< 90%
90-95%
95-100%
Number of Companies
(1): We define this as the net retention rate101 respondents
45
Comparison with
Previous Surveys
Median was fivepercentage points lowerthan 2012 and 2011survey results (which wereboth 106%)
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C S
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8
16
15
$15MM to$25MM
$25MM to
$50MM
Greater than$50MM
Capital Raised So Far
Companies in thesurvey grouphave raised amedian ofroughly $9MM incapital so far.
45
25
0 10 20 30 40 50
Less than$5MM
$5MM to$15MM
Median $9MM
109 respondents
47
Comparison withPrevious Surveys
Well below the $23MMand $22MM in capitalraised by participants inthe 2012 and 2011surveys, respectively.
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Capital Efficiency Expectations Median
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Target All Participants Excluding Companies
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PCS Leadership in Software
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pSelected Recent Transaction Experience
$92,575,000
anne dv sor(ECOM)
Initial Public Offering
$360,525,000
eet atcs(FLTX)
Follow -on Offering
has been acquired by has divested theProgress Apama Solution to
has been r ec apitalized by has been ac quir ed by
has divested
to
has divestedthree product lines to
Corporate Finance Advisory
$120,140,500
ode N(MODN)
Initial Public Offering
$135,240,000
Cvent(CVT)
Initial Public Offering
$73,600,000
Covisint(COVS)
Initial Public Offer ing
$300,035,000
Veeva Systems
Initial Public Offering
2011-2013 YTD Software IPOs
Rank Firm Deals Value ($MM)
1 Pacific Crest Securities 21 $3,407.7
2 Morgan Stanley 15 3,464.8
3 Deutsche Bank 14 1,941.9
4 Goldman Sachs 13 2,783.2
5 J.P. Morgan 12 2,590.7
6 JMP Securities 12 1,913.9
7 Credit Suisse 11 1,769.1
8 Stifel Nicolaus Weisel 10 1,293.6
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$732,550,000
Workday(WDAY)
Initial Public Offering
$104,535,000
Qualys(QLYS)
Initial Public Offering
$70,312,500
E2open(EOPN)
Initial Public Offering
$241,155,000
ServiceNow(NOW)
Initial Public Offering
$263,925,000
punL
Initial Public Offering
$185,725,000
xact arget
Initial Public Offering
$132,307,500
udew re
Initial Public Offering
has been acquired by has acquired
has been acquired by has been acquired by has been acquired by
has been acquired by has been acquired by has been acquired by
has been recapitalized by
$105,800,000
Eloqua(ELOQ)
Initial Public Offering
$93,982,473
Proofpoint(PFPT)
Initial Public Offering
9 UBS 9 1,941.7
10 William Blair & Co 9 857.8
11 Raymond James 7 952.6
12 Cannaccord 6 634.0
13 Needham & Co 6 546.4
14 Wells Fargo 5 1,429.7
15 Piper Jaffray & Co 5 629.3
16 RBC Capital Markets 5 551.0
17 Barclays 4 1,046.6
18 Citi 4 834.2
19 Bank of America 4 755.1
20 BMO 4 678.1