![]() ![]() ![]() This is primarily due to best-in-class companies investing heavily in growth during the early stages, as their absolute headcount and OpEx per FTE exceeds that of other emerging leaders at the same stage. Our best-in-class companies have, on average, ~30% lower ARR per FTE compared to other emerging leaders until reaching ~$50M-$100M ARR, when best-in-class companies begin to significantly outpace other emerging leaders in FTE productivity. ARR per FTE is especially interesting when analyzed against OpEx per FTE. ARR PER FTEĪRR per FTE = Total EOP ARR / Total EOP FTEsĪRR generated per full-time employee (FTE), especially for companies at scale, helps us gauge human capital productivity and provides further insight into a company’s overall operational efficiency. Sometimes, magic number can be too high which - especially paired with a short CAC payback period (<6 months for enterprise SaaS) - may indicate a company is not investing optimally in sales and marketing spend. We find it particularly interesting to analyze magic number in tandem with Customer Acquisition Cost (CAC) and CAC payback period. Notably, over 60% of the Enterprise SaaS companies in our dataset meet and exceed the Rule of 40, compared to ~30% of global private SaaS companies⁶. Rule of 40 for the best-in-class companies we examined averages 72% after reaching $25M ARR, driven higher in early stages due to high ARR growth. When analyzed in concert with growth and retention, we believe Rule of 40 provides great insight into a company’s efficiency.ĭue to the inherent volatility of ARR growth and FCF margin at early stages of growth, we typically only begin to place real weight against Rule of 40 for companies with at least ~$25M ARR, and believe it is most applicable to companies with >$50M ARR. Simply put, Rule of 40 says that growth and profitability should be considered in tandem: a company growing at 40% should target at least breaking even. “Rule of 40” is the principle that a high-performing SaaS company’s combined YoY growth rate and FCF margin should generally meet or exceed 40%. Rule of 40 (%) = ARR Growth (YoY, %) + FCF Margin (%)⁵ In comparison, more than 40% of the Enterprise SaaS companies in our dataset achieve 125%+ net dollar retention during this stage. Broader industry benchmarks show only ~10% of SaaS companies with $0–50M ARR are able to achieve 125% net dollar retention or more⁴. The NDR benchmarks shown here are higher than industry average. This scorecard details the core questions each of these metrics address, and how our portfolio companies stack up against each metric across various stages of maturity: #Reprise iconiq growthsawersventurebeat software#While our quantitative evaluation of software businesses is always tailored to the nuances of a company’s industry, product, operating model, go-to-market motion, or other specifics, the following five metrics are consistently core to our understanding of topline growth and operational efficiency. #Reprise iconiq growthsawersventurebeat full#To request access to our full report on growth and operational efficiency, please reach out to the ICONIQ Analytics team. We hope this quick summary of key enterprise SaaS metrics is useful to you and helps illuminate both why these metrics are valuable and how they evolve over time. All analysis is based on proprietary ICONIQ Growth portfolio data², which we also compare to benchmarks from third-party SaaS industry reports. We also explore how COVID-19 has impacted these KPIs and identify signs of recovery. Our report, aspects of which are summarized below, details the key metrics we use to understand and evaluate growth and efficiency across these companies. This year, along with a full refresh of the analyses, we are excited to share additional perspectives and focus on what we think it means to be a “best-in-class” SaaS company across various stages of growth. Since 2019, we’ve published our annual cornerstone Growth and Efficiency Report, along with a summary of the ICONIQ Enterprise Five (a bespoke assessment rubric) in which we explore what it means to be a top performing SaaS company. Our collaboration with these companies has made us better investors and, more importantly, better partners. As we help leaders achieve their goals, we also listen and learn. Working closely with these exceptional leaders has given us a deep and unique understanding of what strength looks like at all stages of company growth. ICONIQ Growth has been proud to partner with more than 75 leading enterprise software companies, 40 of which have been named the world’s best cloud companies in the Forbes Cloud 100¹. Written by Claire Davis and Christine Edmonds. Key Performance Indicators of Enterprise SaaS Companies ![]()
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