2023-2024 B2B SaaS Benchmarks – VC Cafe

The primary time I wrote about startup benchmarks was in 2019 and it grew to become probably the most common posts on VC Cafe. It’s not a shock, on condition that entrepreneurs are obsessive about knowledge and metrics, however within the conservative VC market of 2024, it feels much more necessary for founders to know what ‘good’ seems like and what traders anticipate.

This publish explores an important benchmarks VCs search for in B2B SaaS with knowledge dropped at you by 20VC/La Famiglia, Serena Capital, Emergence Capital, and Openview Ventures, offering definitions and insights into essentially the most crucial metrics for SaaS corporations.

First some necessary definitions

In the event you’re a SaaS practitioner, be happy to skip this to get to the meat and potatoes.

Key Metrics for B2B SaaS Startups:

1. Annual Recurring Income (ARR) Definition: ARR is the yearly worth of an organization’s recurring income from subscription-based companies.
   • Benchmark: Based on knowledge introduced at SaaStr 2024 by 20VC and La Famiglia, the median ARR for B2B SaaS startups elevating Collection A funding is $3 million, whereas the median for Collection B is $10 million.
2. Month-to-month Recurring Income (MRR) Definition: MRR is the predictable income an organization expects to obtain month-to-month from subscription-based companies.
   • Benchmark: Serena Capital means that B2B SaaS startups ought to goal for a ten% month-over-month MRR development price within the early phases.
3. Internet Income Retention (NRR) Definition: NRR measures the proportion of recurring income retained from present clients over a given interval, contemplating upgrades, downgrades, and churn.
   • Benchmark: Emergence Capital recommends a goal NRR of 120% or larger for B2B SaaS startups, indicating a wholesome growth of income from the present buyer base.
4. Buyer Acquisition Price (CAC) Definition: CAC is the whole value of buying a brand new buyer, together with advertising and marketing and gross sales bills.
   • Benchmark: 20VC and La Famiglia counsel that the best CAC payback interval for B2B SaaS startups needs to be 12 months or much less, that means the income generated from a buyer ought to exceed the CAC inside a 12 months.
5. Gross Margin Definition: Gross margin is the proportion of income remaining after deducting the price of items bought (COGS).
   • Benchmark: Serena Capital advises B2B SaaS startups to focus on a gross margin of 80% or larger to display the scalability and profitability of their enterprise mannequin.
6. Burn Fee Definition: Burn price is the speed at which a startup is spending its capital to finance operations earlier than producing constructive money movement.
   • Benchmark: Emergence Capital recommends that B2B SaaS startups keep a burn price that enables for not less than 18-24 months of runway to offer a buffer for surprising challenges and to attain milestones earlier than the subsequent funding spherical.

High Decile Collection A Metrics for B2B SaaS in 2024 – SaaStr

SaaStr Europa 2024, the most important European occasion deal with SaaS startups happened in London this week and 20VC along with La Famiglia introduced fascinating benchmarks wanted to boost collection A in B2B SaaS (with knowledge credited to Visionaries Membership, a European B2B fund)

The unique picture was a bit fuzzy so right here it’s in desk type in your comfort.

Emergence Capital Past Benchmarks 2024

Emergence Capital and companions surveyed over 600 B2B software program corporations in April 2024 to grasp the not solely how efficiency modified over time, but in addition using Generative AI by corporations and located some fascinating knowledge factors.

• ARR development charges decreased considerably in 2023 and development stage corporations have been most impacted. Firms confronted larger buyer churn and downgrades. This resulted in value slicing workouts to increase runway.
• Fundraising has turn out to be meaningfully more durable. It takes longer to safe rounds, and the scale (and quantity) of rounds has decreased in comparison with 2021.
• 60% of the businesses surveyed leveraged Generative AI of their merchandise

As for benchmarks, under are the median and prime quartile metrics by ARR Vary

Openview 2023 product benchmarks report

OpenView Ventures’ 2023 Product Benchmarks Report offers useful insights for product-led development (PLG) methods primarily based on knowledge from over 1,000 respondents. The primary discovering is that development is cooling – solely one-fifth of corporations rising not less than 75% year-over-year. Nonetheless, PLG stays an necessary a part of the expansion equation, with PLG leaders rising at twice the speed of conventional SaaS corporations.

Just a few stats to name out on the state of PLG (in 2023):

Natural Site visitors Decline: Natural visitors has decreased, representing solely 32% of leads in comparison with 39% the earlier 12 months.

A number of Consumer Acquisition Channels: PLG corporations use a wider mixture of social channels, with 41% leveraging Instagram.

Consumer Activation: Defining and measuring activation metrics is essential. PLG merchandise see larger adoption of those metrics.

Conversion Charges: Free-to-paid conversion charges fluctuate, with freemium merchandise usually seeing a median conversion price of round 5%, whereas free trials have a median price of about 10%.

Gross sales Outreach Impression: Efficient gross sales outreach considerably boosts conversion charges, with PLG corporations benefiting from focused outreach primarily based on a number of person alerts??.

Serena Capital European SaaS Benchmarks 2023

Serena Capital suggests specializing in “environment friendly development” metrics, which embrace:

• Rule of 40 (which is now rule of 60): The sum of an organization’s development price and profitability margin (EBITDA). An excellent benchmark is 40%, with prime quartile corporations aiming for 60% or extra.
• ARR per Worker: Measures effectivity and productiveness, with prime quartile corporations attaining larger ARR per worker figures

The report authors surveyed 700 members from B2B SaaS European startups to provide you with their benchmarks and 5 north star metrics.

In conclusion

Benchmarks can rapidly get outdated and what was true in 2023 could not be correct so take these with a grain of salt.

There’s no level in getting too pressured in case your startup is just not precisely prime quartile for all these metrics on the time it is advisable to elevate, nevertheless it undoubtedly helps to know what the gold commonplace is and what to aspire to.

As a pre-seed investor at Remagine Ventures, half of our investments are in B2B Software program, particularly round applied sciences within the content material creation, distribution, monetisation and analytics house. All the time completely happy to attach with pre-seed founders and supply VC pleasant suggestions. I additionally suggest testing my publish on conversion, retention and churn benchmarks for varied enterprise fashions (B2C subscription, marketplaces, and so on).

Eze is managing companion of Remagine Ventures, a seed fund investing in bold founders on the intersection of tech, leisure, gaming and commerce with a highlight on Israel.

I am a former basic companion at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google’s first bodily hub for startups.

I am additionally the founding father of Techbikers, a non-profit bringing collectively the startup ecosystem on biking challenges in help of Room to Learn. Since inception in 2012 we have constructed 11 faculties and 50 libraries within the creating world.

Newest posts by Eze Vidra (see all)

Associated