Blog Post

Jun 2, 2023

A Hint Of SaaS - June 2023

At the SaaS Founder Summit in February, we drilled down on the importance of pricing itself as a growth vector. Finding the right pricing tiers, strategies, and levers is a vital piece of building a successful software company.

Revenue retention (both Gross and Net) is another, closely-related, vital metric of SaaS companies' performance. Put simply, a company with 125% net revenue retention will grow by 25% next year on its current customer base alone. At scale, that makes growing by 100%+ considerably easier! Debt-focused fund SaaS Capital (note: Not us 😉) published its SaaS Retention benchmarks last month. The annual report provides clear, tangible guidance about this crucial metric for software companies.

The full study is available here (PDF) but the charts displayed above highlight some of the study's key findings. Namely: 

  • As ACVs rise, so too does net revenue retention. Benchmark levels for gross revenue retention, on the other hand, flatline around 92-93%. 

  • For companies selling six-figure contracts, anything >120% NRR is best-in-class. While the same figure is still >100% for lower-ACV products, the bar to be "best-in-class" is considerably lower.

  • For companies with any degree of scale (>$1M ARR), net revenue retention exceeds 100%. 

  • Multi-year contracts have revenue expansion built-in. The average company selling products on a month-to-month or annual basis, by contrast, has little automatic expansion.