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Author: Alex Rohrbach

2022 Thomvest SaaS Benchmarks — Part II: Output & Operationalization

by Alex Rohrbach

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...)

2022 Thomvest SaaS Benchmarks — Part I: Data Sources & Methodology

by Alex Rohrbach

2022 Thomvest SaaS Benchmarks — Part I: Data Sources & Methodology

Why We Created (Yet Another) SaaS Benchmark & Our Compilation of Private Company Benchmarks

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.

Why Another SaaS Benchmark?

Our portfolio companies and founders often ask, “what is top performance for companies like mine?”

It depends.

While “it depends” is arguably the most accurate answer (speaking as a former management consultant), more information can be distilled for making decisions. We value the clarity that comes from forming a perspective on top performance. In the first of this two-part blog, we share our process of formulation and output for median and top quartile performance.

Some may say we recreated the wheel. Many firms have published SaaS benchmarks in the last couple of years. Why create another?

We created our benchmark to overcome the challenge of comparing across benchmarks. Our goal is to provide a clear, relevant, and easy-to-use benchmark. We believe startup leaders and investors will find value in applying our benchmarks. We propose best practices to operationalize these benchmarks and guardrails for making decisions.

There is extensive publicly available knowledge on SaaS performance. From private to public, bootstrapped to venture-backed companies. The research is excellent. Scale VP wrote a book about their benchmarks.

We learned so much while reviewing these benchmarks that we decided to (Read more...)