Top 10 in Tech - What to know for Week ending November 15, 2019

David Skok is a legend in the SaaS world and we have written about his work extensively in the past, as well as convincing him to speak at our events. His annual report in partnership with KBCM Technology Group (formerly Pacific Crest Securities) is out and I’m dedicating this weeks newsletter to 10 top nuggets from this report! PDF links to the full report here - great benchmarks for any SaaS business. This may be part 1 of 2 part series as there is so much great insight in this report.
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1. GROWTH: Median organic ARR growth for the year surveyed (2018) was 36%. Thus is across 424 SaaS businesses distributed globally (but 2/3 of which were US domiciled). This rate is pretty evenly split across different contract size businesses - so there is no obvious relationship between ACV and growth. Companies surveyed average median ARR of $8.7m 
2. CAC: This one needs nuance, so the report has broken it down into blended, new, up-sell, and expansion. Median blended is every $1 of ARR generated costs $1.14. Net new is almost double ($1.34) of up-sell ($0.78) and 3x expansion (sitting at a neat $0.50). This chart alone highlights why having a customer focused strategy is critical for growth. 
3. CAC PAYBACK: This one is a little painful. Blended CAC payback period is 17 months and net new median is 20months. This really highlights the deep relationship to Capital to fuel a SaaS companies growth.
4. CUSTOMERS: 2/3rds of revenue come from designated customer base and companies who focused on SMB-Mid grew modestly faster than other groups (but business size is not indicative of a similar relationship to ACV.
5. CAPITAL EFFICIENCY: How much ARR can each full time employee absorb in an efficient SaaS business? The overall median is $110k ARR per FTE. For early stage businesses (those with under $5m ARR) that number is higher at $139k.
6. CROSS SELL/UPSELL: 37% of new ARR bookings is attributable to cross sell/up-sell activities. Larger companies use this strategy more heavily than their smaller counterparts (2x more). This is likely due to not being so reliant on new acquisition focused as the business matures.
7. GO TO MARKET: The primary mode of Sales and Marketing efforts remains Field Sales based, with Inside Sales taking a very close second strategy for smaller businesses (under $10m ARR). Now what is interesting in this part of the report is that those companies with a mixed source of sales (both inbound and outbound) had a remarkably larger rate of organic growth - 50% compared to 36% for Inside Sales and 33% for Field.
8. CHURN: This is related to Go To Market above - Businesses primarily focused on Field-based Sales experience, on average, lower churn and higher net dollar retention (CAC remains unchanged).
9. SPEND: Figuring out how to optimize marketing spend and growth rate is a key question and this study doesn’t show great benchmarks - percentage of revenue in pretty much equals percentage growth out, but with an ever increasing range of outcomes as spend increases per business. More solid benchmarks are with the Sales vs Marketing spend ratios which stay at about 2:1 regardless of market-facing strategies (although Mixed is a bit of an outlier).
10. COMMISSION: Commission levels of sales are pretty stable across sale types at about 10-14%. Commissions on renewals is only 3% and upsell is 9% - however about 50% of the time this is not paid at all. (Bringing up another subject on how much revenue a Customer Service Manager can manage).

POD OF THE WEEK: Consumer is way ahead of enterprise so far with AI applications a16z take a look this week at AI in B2B.

BONUS: Pitch perfect takes practice. Startup Blink offers online pitch practice weekly - you just have to do it 6pm or 9pm Greenwich Meantime.