2022 Thomvest SaaS Benchmarks — Part II: Output & Operationalization



2022 Thomvest SaaS Benchmarks — Part II: Output & Operationalization

Our 2022 Private Company SaaS Benchmarks & How to Operationalize Them

By Alex Rohrbach

In this two-part series, we examine private company SaaS benchmarks. Part I explains why we created our benchmark and what we learned from other benchmarks. Part II presents our 2022 SaaS benchmarks and describes ways to operationalize them.

We calculated our benchmarks using a “trimmed mean” of the seven published SaaS benchmarks. A trimmed mean helps to eliminate the influence of outliers that would unfairly skew the results. At each revenue range, we took the mean after excluding top and bottom outliers. We used a non-trimmed mean when four or fewer datasets were available.

We chose metrics that were:

  1. Simple — Less is more. Metrics should reveal significant problems, not necessarily diagnose root causes.
  2. Interest aligned — Metrics should matter for operators and investors. Otherwise, benchmarks can create misalignment and distraction that detracts from performance.
  3. Clear — Metrics (and their underlying drivers) should be well understood and hard to manipulate.
  4. Evidence-based — Metrics should be supported by evidence, not gut feelings or traditions.

Let’s explore a few of these metrics in more detail. We include definitions at the bottom of this article.

Annual Recurring Revenue (ARR) Growth

As companies grew, growth slowed. A vast gulf emerged between median and top quartile growth performance. Lagging growth performance may not (necessarily) be a problem if other metrics outperform. For example, the Rule of 40 (see below) balances growth and EBITDA margin.

We saw a wide range of ARR growth across (Read more...)