Category: benchmark

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...)

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



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...)

[Video] Bill Gurley on Surviving Downturns


This post is by Om Malik from On my Om


No matter where you look, the technology industry — from stalwarts to startups — is going through a reset. And that has led many companies to lay off people, cut costs and pare back their ambitions.

For so many of our startup founders, this is a new experience — a whole generation of entrepreneurs hasn’t experienced a bear market. And as a result, they don’t have frameworks to deal with this new reality. It is not as if they don’t want to deal with the situation. It is just that most founders are biased towards optimism (as they should) and have a hard time optimizing for the realities of tough times.

One of the toughest tasks for founders is figuring out how to tighten their belts. It is hard to decide how many people to cut from the company payrolls. People make incremental cuts to their teams — and these cuts don’t have a real impact and lead to more cuts.

Bill Gurley, a partner at Benchmark Capital, is a venture investor who has been through a few ups and downs. He recently tweeted:

(Read more...)

[Video] Bill Gurley on Surviving Downturns


This post is by Om Malik from On my Om


No matter where you look, the technology industry — from stalwarts to startups — is going through a reset. And that has led many companies to lay off people, cut costs and pare back their ambitions.

For so many of our startup founders, this is a new experience — a whole generation of entrepreneurs hasn’t experienced a bear market. And as a result, they don’t have frameworks to deal with this new reality. It is not as if they don’t want to deal with the situation. It is just that most founders are biased towards optimism (as they should) and have a hard time optimizing for the realities of tough times.

One of the toughest tasks for founders is figuring out how to tighten their belts. It is hard to decide how many people to cut from the company payrolls. People make incremental cuts to their teams — and these cuts don’t have a real impact and lead to more cuts.

Bill Gurley, a partner at Benchmark Capital, is a venture investor who has been through a few ups and downs. He recently tweeted:

(Read more...)

How Differentiated Insights Lead to a Stronger Financial Portfolio



The following content is sponsored by MSCI

How Differentiated Insights Lead to a Stronger Financial Portfolio

Differentiated Insights Lead to a Stronger Financial Portfolio

How can wealth managers build better portfolios for a better world? It all begins with the right insights. Using risk and return analytics, along with climate and ESG considerations, wealth managers can:

  • Propose compelling solutions
  • Build stronger portfolios
  • Monitor portfolio performance

In this graphic from MSCI, we show how financial portfolio insights help a wealth manager meet their clients’ needs at each step of the process.

Insights in Action

Let’s look at how these benefits take shape for a hypothetical client and their wealth manager.

  • Client: Faye
  • Investable assets: $1 million
  • Risk tolerance: Medium
  • Preferred strategy: ESG integration

Given this profile, a variety of financial portfolio insights will help Faye understand how a new solution meets her needs.

Build a Strong Financial Portfolio

In the first stage, the wealth manager will begin building a model portfolio by conducting research and risk/return analytics. A stress test shows that the constructed model portfolio would have performed better than its benchmark during historical market downturns.

Downturn EventPortfolio ReturnBenchmark Return
Global Financial Crisis (2007-2009)-34.7%-36.4%
Oil Crisis (1972-1974)-29.3%-31.4%
Argentine Economic Crisis (2000-2002)-23.9%-24.2%
Dot-com Slowdown (2001)-22.2%-24.2%
Market Crash (Oct 14-19, 1987)-15.0%-16.9%

Financial portfolio construction can also include analyzing exposure to factors, or the investment characteristics that drive risk and return.

To take ESG into account, the wealth manager compares an ESG model portfolio to one of their (Read more...)