state of saas - saasfest 2016

The State of SaaS SaaSFest 2016

#SAASFEST16 Brought to you by your friends at@PriceIntel

Today is all about change.


Today is all about change, and how you’re going to evolve.


SaaS 1.0


SaaS 1.0: Function, Connection, and Infrastructure


SaaS 1.0


SaaS 2.0


SaaS 2.0: Customer, Market, and Product


Who in the world are you?


ProfitWell

SaaS pricing software and tech enabled

services

Free financial metrics for subscription

businesses

Price Intelligently

Happy customers big and small


We’ve seen inside more software companies than anyone else on the

planet.


We live in a world where acquisition, as we know it,

is dead.


The market is saturated, and unit economics just aren’t

what they used to be…


Competition is now rampant.


Q: How many competitors did you have in your first year of business?

A: Companies started more than a year ago had far fewer competitors in their space than companies started today.

N = 1432 software founders and executives

Aver

age

# o

f Com

petit

ors i

n th

eir f

irst

year

of b

usin

ess

0

3

5

8

10

5 years old 3 years old 1 year old

9.7

4.82.6


Q: How many competitors do you have now?

A: Older companies increased competition over time, likely due to attracting new entrants, as well as decreased barrier to entry


Curr

ent A

vera

ge N

umbe

r of C

ompe

titor

s

0

3

7

10

13

5 years old 3 years old 1 year old

10.2511.7512.15


The relative value of features is declining. All software is going to $0.


N = Varies by line, but minimum of 10,000 customer respondents per line

WTP

as %

of W

TP 4

Yea

rs A

go

0%

30%

60%

90%

120%

4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today

Core Features Single Sign On Integrations Analytics

Q: How has software willingness to pay (WTP) evolved over time?

A: Software willingness to pay has declined significantly over the past few years due to increased options and higher demands.


CAC is steadily increasing over time.


Q: How has customer acquisition cost (CAC) evolved over time?

A: Customer acquisition cost has increased significantly over the years due to market saturation of marketing vying for consumer attention.

Blen

ded

CAC

as %

of b

lend

ed C

AC 4

Ye

ars A

go

-15%

0%

15%

30%

45%

60%

4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today

B2B B2C

N = 437 companies per line


We make matters worse by focusing on the wrong fundamentals.


Q: Which pillar of your business is the most important to your growth?

A: Founders and software executives overwhelmingly put their support behind acquisition based growth.


% o

f tot

al re

spon

dent

s

0%

25%

50%

75%

100%

More logos Making more money per customer Keeping customers around longer


There are clear winners and losers in this environment.


Q: What was the growth focus of companies that died in the past couple of years?

A: Of 90 companies that died in the past 3 years, the majority of them were focused on acquisition based growth.

N = 90 companies that went out of business or were fire sold in the past 36 months

% o

f Com

pani

es

0%

25%

50%

75%

100%

Less than $10M ARR $10.01M to $25M ARR $25.01M+ ARR

Primarily Acquisition Growth Balanced Growth


Q: How does growth compare between acquisition based companies and their balanced counterparts?

A: Acquisition based growth companies grow at a smaller rate than those with a balanced growth approach (growth from all three pillars of growth).

N = Minimum of 512 companies per segment pulled from the middle 2/3 of companies in terms of growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate.

% o

f Com

pani

es

0%

14%

28%

41%

55%

2012 2013 2014 2015

Primarily Acquisition Growth Balanced Growth


Q: How does growth compare between perpetual and subscription software companies?

A: Subscription software company growth is outpacing that of perpetual based software companies.

N = Minimum of 512 companies per segment pulled from the middle 2/3 of companies in terms of growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate.

% o

f Com

pani

es

0%

14%

28%

41%

55%

2012 2013 2014 2015

Perpetual Subscription


Q: If we improve each area of a software business equally, what’s the relative impact on revenue?

A: Monetization and retention based growth far outpaces acquisition based growth.

% im

pact

on

reve

nue

0%

2%

5%

7%

9%

12%

14%

Acquisition Monetization Retention

3.32%

N = Data from 734 software companies




% im

pact

on

reve

nue

0%

2%

5%

7%

9%

12%

14%


6.71%3.32%





% im

pact

on

reve

nue

0%

2%

5%

7%

9%

12%

14%


6.71%

12.7%

3.32%





% im

pact

on

reve

nue

0%

3%

6%

9%

12%

15%

18%


9.32%

15.89%

2.35%6.71%

12.7%

3.32%

2008 - 2012 2013 - 2016



The root cause is we don’t know our buyers.


Q: Which single category describes your buyer personas internally?

A: When asked, SaaS founders and executives indicated that their company’s buyer personas weren’t well defined or centralized.

% o

f res

pond

ents

0%

20%

40%

60%

80%

100%

Thought about them Central document Quantified buyer personas

6.6%36.6%

56.8%

N = 1,647 SaaS Founders and Executives


Q: How many customer development conversations (non-sales) are you having per month?

A: SaaS founders and executives indicated that their companies are primarily only talking to less than 10 customers in a cust dev capacity per month.

% o

f res

pond

ents

0%

20%

40%

60%

80%

100%

10 or less 11 to 25 26 to 50 51+

3.9%10.1%17.7%

68.3%



Q: How many experiments are you running per month (including marketing experiments)?

A: SaaS founders and executives indicated that their companies are overwhelmingly running less than 10 experiments per month.

% o

f res

pond

ents

0%

20%

40%

60%

80%

100%

0 1 to 3 4 to 10 11+

2.7%12.1%37.8%47.8%



The is should be scary.


Point of Conversion

Offer Product #1

Justify price #1 Offer Product #1

Justify price #1

Offer Product #1

Justify price #1

Drive Customer #1 Drive Customer #2 Drive Customer #3

Buyers are the central tenet of your business


Recognizing the problem is step 1.


Step 2 is learning how to solve the problem.



7:30 AM

8:30 AM

9:00 AM

9:30 AM

10:00 AM

10:30 AM

11:00 AM

11:30 AM

12:00 PM

12:30 PM

1:00 PM

Registration And Breakfast

Welcome And State Of SaaS Patrick Campbell

You’re Too Focused On Product/Market Fit Brian Balfour

Why Half Of You Will Go Out Of Business: The Move From Cloud First To Customer First David Cancel

Embracing Humility: 5 Ways You’re Probably Failing Your Customers And What You Can Do About It Tara Robertson

Consciously Cultivating Raving Fans Heidi Jannenga

Break

Retention Throughout The Entire Funnel Rob Walling

Building A SaaS Company Isn’t What It Used To Be: Your Competition Now Matters Hiten Shah

How Video Is The Future Of Marketing Naike Romain

Lunch

2:00 PM

2:30 PM

3:15 PM

3:45 PM

4:15 PM

4:45 PM

5:15 PM

5:45 PM

7:15 PM

An Actual, Practical Conversation Around Growth Suneet Bhatt

Turning Around A Company With Growth In 90 Days Drew Sanocki

The Hidden Talents Of Email (Yes, Email): Creating Customer-Centric Messages Justine Jordan

Modeling Freemium: Lessons Learned Along Insightly’s Journey Karl Laughton

Break

From Startup To IPO: Unconventional Lessons From The Pricing Trenches Brad Coffey

Pivoting To A New Market: A Real-World Lesson In Pricing and Personas John Marcus III

Forget Your Feelings: Here’s How To Quantify Your Buyer Personas Patrick Campbell

After Party Mija Cantina & Tequila Bar Faneuil Hall Marketplace 1 S Market St Boston, MA 02109

Two ground rules.


Pitching.


Follow the golden rule.
