pacific crest 2013 saas survey

8/12/2019 Pacific Crest 2013 SaaS Survey

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2013 Pacific Crest Private2013 Pacific Crest Private

SaaS Company SurveySaaS Company SurveyResultsResults


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Pacific Crest 2013 Private SaaS CompanySurvey: Summary of Results

This presentation provides a summary and analysis of the results of a survey whichPacific Crests investment banking software team conducted in June-July 2013

Represents the fourth such survey Pacific Crest has done

The survey included executives from 155 private SaaS companies, twice as many as participatedin 2012 and 2011

Much of the increase in participants came from smaller / younger companies, which we welcomebut which we also needed to be cognizant of when analyzing results

Broad diversit of SaaS com anies artici ated:

$0-$60MM+ in revenues ($5MM median)

25-250+ employees (50 median)

10-2,000+ customers (190 median)

$100s to $MMs median annual contract value ($20K median)

Participants from around the world, although primarily U.S.

Our goal is to provide useful operational and financial benchmarking data tomanagers and investors in SaaS companies

2


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58

30

35

40

45

50

55

60

ompanies

Survey Participant Revenue Distribution

Median $5MMWhile we hadalmost twice asmanyparticipants in2013, most of theincrease camefrom companieswith less than$2MM inrevenues.

18 20

10

15

11 11

5 4

0

5

10

15

20

Less than$2MM $2MM-$5MM $5MM-$10MM $10MM-$15MM $15MM-$25MM $25MM-$40MM $40MM-$60MM $60MM-$100MM Greater than$100MM

Numbero

fC

2012 Revenue

152 respondents

3

Comparison withPrevious Surveys

Companies with


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Survey Participant Geography (HQ)

For the first time,we askedparticipants toprovideinformation onwhere theircompanies areheadquartered.

US Regions

North California Silicon Valley 33

Southern California 8

Boston / New England 18

Pacific Northwest 5

New York Metropolitan Area 11

Washington DC 3

Southeast U.S. 9

Midwest / Chica o 12

1

2

119

16

2

4

Colorado / Utah 7

Texas 5

Other U.S. 8

TOTAL: 119

Other RegionsAsia 1

Europe 16

Middle East / Africa 2

Latin America 2

Australia / New Zealand 4

144 respondents

4


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5


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How Fast Did / Will You Grow GAAP Revenues?

Median 2012 GAAP Rev Growth 41%

Median 2013E GAAP Rev Growth 47%

30

41

2726

35

30

35

40

45

panies

Historicalrevenue growthrates for thegroup arecentered justover 40%, whilethe medianprojected growthis 47% for 2013.

147 and 141 respondents, respectively

5

19

11

17

0

16 16

21

0

5

10

15

20

< 0% 0%-15% 15%-30% 30%-45% 45%-60% 60%-100% > 100%

NumberofC

o

2012 Revenue Growth 2013E Revenue Growth

6


Very similar historicalgrowth rates as 2012survey, but moreoptimistic about forecast.


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How Fast Did / Will You Grow GAAP Revenues?(Excluding Companies 100% growthcomes from thelarge number ofsmall companies.Excludingcompanies with 100%

Numbero

f

2012 Revenue Growth 2013E Revenue Growth

more traditionalbell curvecentered in themid 30%s.


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Median Growth Rate as a Function of Size of Company

Median 41%

Looked at moredirectly, it's clearthat the smallestcompaniesexperienced thehighest growthrates.

89%

41%

50%

75%

100%

rowthRate

Respondents: $60MM: 8

8

34% 34%

21% 23%

0%

25%

Less than

$2MM

$2MM-$5MM $5MM-

$10MM

$10MM-

$15MM

$15MM-

$25MM

$25MM-

$40MM

$40MM-

$60MM

Greater than

$60MM

2012RevenueG

2012 GAAP Revenue


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25%

34% 34%

27%25%

27%

20%

30%

40%

12GrowthRate

Median Growth Rate as a Function of Contract Size(Excluding Companies


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44%

90%

80%

50%50%

60%

70%80%

90%

100%

rowthRate

Median Growth Rate as a Function of Sales Strategy

Median41%

Across the entiregroup,companies whichmainly useinternetdistribution arerealizing thehighest growthrates.

26%

0%

10%

20%

30%

40%

Field Sales Inside Sales Internet Sales Channel Sales Mixed

2012

G

Primary Mode of Distribution(1)

(1): Primary Mode of Distribution At least 50% of new ACV bookings from new customers in 2013E come from designated distribution channelRespondents: Field 47, Inside 39, Internet 21, Channel 4, Mixed 15

10


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50%

60%

70%

80%

90%

100%

rowthRate

Median Growth Rate as a Function of Sales Strategy(Excluding Companies


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Median Growth Rate as a Function of TargetCustomer(1)

Median Revenue Growth 41%

Median Revenue Growth (excl.


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- -

13


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Primary Mode of Distribution

Field salesremains the mostpopular way tosell, with 37% ofparticipantsemploying it as

their primarymode ofdistribution (51%if we excludecompanies with


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Primary Mode of Distribution as a Function ofMedian Initial Contract Size

92%100%

54%

25%48%

13%5%

50%

60%

70%

80%

90%

100%

Channel Field Inside InternetAs expected,companies withlarger mediancontract sizestend to rely moreheavily on field

sales.

Note: Initial ACV of a contract

Respondents: $250K: 8

15

4% 8%14%

29%

70%38%

0%

10%

20%

30%

40%

< $5k $5K-$25K $25K-$100K $100K-$250K >$250K

Median Contract Size (ACV)

Comparison with

Previous Surveys

We found much heavieruse of inside sales amongcompanies in the mid-tier

in this survey, 54% ofrespondents in the $5-25kgroup used inside salesvs. only 33% in 2012.


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4

7

6

2

$1.25-$1.50

$1.50-$2.00

$2.00-$3.00

Over $3.00

CAC(1): How Much Do You Spend for $1 of NewACV from a New Customer?

(Excluding Companies


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CAC on New Customers vs. Upsells vs. Renewals(Excluding Companies


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Median CAC on New Customers vs. Upsells vs. Renewals(Companies


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What Percentage of New ACV is from Upsellsto Existing Customers?

Median 13%

The medianrespondent gets13% of new ACVsales fromupsells; thelargest

companies relymore heavily onthis "land andexpand"phenomenon.

15% 16%

25%

22%

15%

24%

32%

15%

20%

25%

30%

35%

VfromU

psells


20


Consistent with our 2012survey results.

5%

0%

5%

10%

Less than$2MM

$2MM-$5MM

$5MM-$10MM

$10MM-$15MM

$15MM-$25MM

$25MM-$40MM

$40MM-$60MM

Greaterthan

$60MM

%N

ew

A

2012 GAAP Revenue


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25%

15% 15% 15%

30%

15%

25%

35%

18%

35% 35%

15%

20%

25%

30%

35%

40%

CVfromUpsells

Are the Fastest Growing Companies RelyingMore on Upsells?

Median 13%

When we divideour respondentpool by growthrate, we find thatthe top growersin each size

class generallyupsell more thanthe slowergrowers.

What Percentage on New ACV are from Upsells to Existing Customers?

5%

10% 10%

6%

0%

5%

10%

Less than$2MM

$2MM-$5MM

$5MM-$10MM

$10MM-$15MM

$15MM-$25MM

$25MM-$40MM

$40MM-$60MM

Greaterthan

$60MM

%New

2012 GAAP Revenue


21

= Bottom 50% Growers= Top 50% Growers


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4

2

3

2

50-75%

75-100%

100-150%

150-200%

Professional Services Impact on Go-to-Market(Excluding Companies 50%

Median29%

Professionalservices play aminor role formost of thegroup, with themedian company

booking P.S.revenuesequivalent to11% of first yearcontract value.P.S. margins arein the high 20s%.

41

18

14

0 10 20 30 40 50

0-10%

10-25%

25-50%


Median 11%

22

2

5

1

1

0 5 10 15 20 25 30

< (50%)

(25%)-(50%)

(15%)-(25%)

(5%)-(15%)

excluded

companies with


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15%

21%

15%

20%

25%

rACV

Professional Services (% of 1st Year ACV) as aFunction of Target Customer

(Excluding Companies


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18

24

15

12

75-80%

80-85%

85-90%

> 90%

Subscription Gross Margins

Median 79%

What is your gross profit margin on just subscription/SaaS revenues?

Mediansubscriptiongross marginsare 79% for thegroup. Note that,

while notdepicted here,the result doesnot changematerially whenremoving thesmall companiesfrom the rou .

7

1

3

9

6

0 10 20 30

< 50%

50-55%

55-60%

60-65%

65-70%

-

109 respondents

24


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None

> 50%31%

0-10%

10-25%5%

> 25%6%

Freemium / Try Before You Buy

Freemium

Expected New ACV in 2013 fromFreemium Leads

Try Before You Buy

Expected New ACV in 2013 fromTry Before You Buy Leads

Approximately25% ofcompanies makeuse of freemiumin some way,although very

little newrevenues arederived here.Try Before YouBuy is muchmore commonlyused: two-thirds

0-10%14%

10-50%19%

None75%

14%


25

use it and many

of those derivesignificantrevenues from it.


Very consistent resultswith previous years.


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22

28

16

20

25

30

spondents

Sales CommissionsMedian Commission Paid 9%

Median salescommission ratefor the group is9%.

5

1013

8

10

3

0

5

10

15

0-1% 1-3% 3-5% 5-7% 7-9% 9-11% 11-13% 13-15% 15+%

Numberof

Re

Sales Commission (As % of ACV)

115 Respondents

26


Consistent with 2012results.


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13

10

15

pondents

Field Inside

Sales Commissions by Sales Strategy

Inside Median Commission Paid 9%

The surveyresults indicatethat there is not asignificantdifference insales

commissionspaid by go-to-market strategy.

Field Median Commission Paid 9%

6

5

4

6

2 2

6

2

3

2

5

4

5

1

4

0

5

0-1% 1-3% 3-5% 5-7% 7-9% 9-11% 11-13% 13-15% 15+%

NumberofRe

Sales Commission (As % of ACV)

Field 44 respondents; Inside 26 respondents, excludes companies with revenues


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6%

10%

11%

8%

9%

8%8%

12%

alesCommissio

n

Sales Commissions as a Function of MedianContract Size

Median 9%

We weresurprised to seevery littlerelationshipbetween salescommission rates

and averagecontract sizes(except at thevery low end).

0%

4%

< $1K $1K-$5K $5K-$25K $25K-$100K $100K-$250K >$250K

Median



28


In 2012, we saw thehighest commission ratesfor the


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Upsells

Median Commission

Rate

6%

% of Respondents

Paying Full

Commission(1)

55%

Renewals

Median Commission

Rate

2%

% of RespondentsPaying 0-1%

35%

No Additional

Commission 24%

Nominal Kicker 12%

Full Commission 17%

Additional Commission

for Extra Years on Initial Contract

% of Respondents Paying:

Commissions for Renewals, Upsells and Multi-Year Deals

Not surprisingly,commissions onrenewals aretypically deeplydiscounted, witha median rate of2%. Upsellscommand amedian rate of6%, althoughroughly half ofthe companiespay fullcommissions on

(1) Same rate (or higher) than new sales commissionsRespondents: Renewals: 106, Upsells: 105, Extra Years on Initial Contract: 98

29

upsells.


Very similar results to2012. The biggestchange is in the thirdcolumn, analyzingcommissions on multi-year deals. In the 2013

survey, only 24% ofrespondents paid noadditional commissions onthe additional years; in2012 almost half of theparticipants paid noadditional commissions.


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Cost Structure(Excluding Companies


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For Comparison: Historical Results of SelectedPublic SaaS Companies

Total Revenue Run-Rate

~$25MM ~$50MM ~$100MM

Median Values

Gross Margin 63% 65% 65%

Sales & Marketing 48% 45% 45%

Research & Development 23% 20% 17%

33

(1): YoY Revenue Growth compares against previous years revenue of the companies at the timeMedian includes ATHN, BCOV, BV, CNVO, CRM, CSOD, CTCT, DMAN, DWRE, ECOM, EOPN, ET, FLTX, LOGM, MKTG, MKTO, MRIN, N, NOW, PFPT,QLYS, RNOW, RP, SFSF, SPSC, SQI, TLEO, VOCS and WDAY~$25M median excludes FLTX, QLYS, RP and WDAY~$50M median excludes RP~$100M median excludes BCOV, DMAN, DWRE, ECOM, EOPN, MKTO, MRIN, QLYS, SPSC and SQI

G & A 17% 14% 13%

EBIT Margin (26%) (10%) (3%)

FCF Margin (7%) (1%) 1%

YoY Revenue Growth Rate(1) 105% 62% 38%


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23%

28% 28%

31%

28% 28%

25%

30%

35%

40%

45%

50%

gSpendas%o

fRevenue

Sales & Marketing Spend vs. Projected Growth Rate(Excluding Companies 100%

Me

dianSales&Mark

eti

2013E Growth Rate

Respondents: 0 -15%: 11, 15-30% : 20, 30-45%: 16, 45-60%: 10, 60-100%: 5, >100%: 5

34

others. (Note that

the smallestcompanies skewresults due to moreinflated growth andwere thus removedfrom this analysis).


In the 2012 and 2011surveys we saw theconventionally expectedcorrelation, with higherS&M spend leading tohigher growth rates.


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22

11

10

1

$25K-$100K

$100K-$250K

$250K-$1M

> $1M

Median Annual Contract Size (ACV) perCustomer

The medianannual contractsize (subscriptioncomponent only)for the group was$20k per year.

14

17

26

0 5 10 15 20 25 30

< $1K

$1K-$5K

$5K-$25K

101 respondents

Median $20K

36


As expected, with theincrease in smaller-sizedparticipants, this waslower, with the 2012survey at $24k and the2011 survey at $37.5k.


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Contract Length as a Function of Contract Size

60%

70%

80%

90%

100%

ntractLength

Month to month Less than 1 year 1 to 2 years 2 to 3 years 3 years or moreThe phenomenonof longer contractterms for largercontracts ispretty clear.


0%

10%

20%

30%

40%

50%

$250K

Averag

eC

Median Contract Value (ACV)

38


We did see more use ofshorter contract lengthsthan in previous surveys e.g., roughly 30% ofcompanies in the $5-$25kgroup used month-to-month or less than oneyear contracts (vs. none in2012). Even somecompanies in the"elephant hunter" groupshad shorter contracts.


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What is Your Primary Pricing Metric?

Seats, 37.7%

Other, 17.5%

Other includes: Data usage, number of apps being tested, email volume, customer devices and amount of content110 respondents

Sites, 7.9%

Total employees,5.3%

Database size,3.5%

transactions,

28.1%

39


These results are virtuallyidentical to 2012 and2011.

G C


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7

11

15-20%

>20%

Annual Gross Dollar Churn(Excludes Companies


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6

15

17

7-9%

10-15%

> 15%

Annual Unit Churn(1)

(Excludes Companies


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8% 8%

9%

6%

7%

8%

9%

10%

Annual Gross Dollar Churn as a Function of ContractLength(Excludes Companies


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Size(Excludes Companies $250K)have the lowestchurn, and thosewith the smallest

deal sizes havethe highestchurn. However,churn rates in thebroad middlerange, forcompanies with

18%

9%

13%13%

10%

12%

14%

16%

18%

20%

Churn

Note: median line indicates median gross churn across all respondents as comparisonRespondents: $250K: 9

43

sizes between

$1k and $250k,dont show muchof an explainablepattern.


Lack of correlation in thebroad middle ranges wasnot the case in 2012 or2011.

8%

2%

0%

2%

4%

6%

8%

$250K

G

ros


Annual Gross Dollar Churn as a Function of Primary


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6%

9% 9%

6%

8%

10%

yDistribution Mode(Excludes Companies


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14

16

23

~

100%-105%

105%-110%

> 110%

Annual Net Dollar Retention From ExistingCustomers

Median 101%

How much do you expect your ACV from existing customers to change,including the effect of both churn and upsells?(1)

The medianannual netretention rates,including churnbut also includingthe benefit of

upsells, is 101%.

15

6

6

0 5 10 15 20 25

< 90%

90-95%

95-100%

Number of Companies

(1): We define this as the net retention rate101 respondents

45

Comparison with

Previous Surveys

Median was fivepercentage points lowerthan 2012 and 2011survey results (which wereboth 106%)


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46

C S


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8

16

15

$15MM to$25MM

$25MM to

$50MM

Greater than$50MM

Capital Raised So Far

Companies in thesurvey grouphave raised amedian ofroughly $9MM incapital so far.

45

25

0 10 20 30 40 50

Less than$5MM

$5MM to$15MM

Median $9MM

109 respondents

47


Well below the $23MMand $22MM in capitalraised by participants inthe 2012 and 2011surveys, respectively.


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Capital Efficiency Expectations Median


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Target All Participants Excluding Companies


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PCS Leadership in Software


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pSelected Recent Transaction Experience

$92,575,000

anne dv sor(ECOM)

Initial Public Offering

$360,525,000

eet atcs(FLTX)

Follow -on Offering

has been acquired by has divested theProgress Apama Solution to

has been r ec apitalized by has been ac quir ed by

has divested

to

has divestedthree product lines to

Corporate Finance Advisory

$120,140,500

ode N(MODN)


$135,240,000

Cvent(CVT)


$73,600,000

Covisint(COVS)

Initial Public Offer ing

$300,035,000

Veeva Systems


2011-2013 YTD Software IPOs

Rank Firm Deals Value ($MM)

1 Pacific Crest Securities 21 $3,407.7

2 Morgan Stanley 15 3,464.8

3 Deutsche Bank 14 1,941.9

4 Goldman Sachs 13 2,783.2

5 J.P. Morgan 12 2,590.7

6 JMP Securities 12 1,913.9

7 Credit Suisse 11 1,769.1

8 Stifel Nicolaus Weisel 10 1,293.6

51

$732,550,000

Workday(WDAY)


$104,535,000

Qualys(QLYS)


$70,312,500

E2open(EOPN)


$241,155,000

ServiceNow(NOW)


$263,925,000

punL


$185,725,000

xact arget


$132,307,500

udew re


has been acquired by has acquired

has been acquired by has been acquired by has been acquired by

has been acquired by has been acquired by has been acquired by

has been recapitalized by

$105,800,000

Eloqua(ELOQ)


$93,982,473

Proofpoint(PFPT)


9 UBS 9 1,941.7

10 William Blair & Co 9 857.8

11 Raymond James 7 952.6

12 Cannaccord 6 634.0

13 Needham & Co 6 546.4

14 Wells Fargo 5 1,429.7

15 Piper Jaffray & Co 5 629.3

16 RBC Capital Markets 5 551.0

17 Barclays 4 1,046.6

18 Citi 4 834.2

19 Bank of America 4 755.1

20 BMO 4 678.1

pacific crest 2013 saas survey

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