SaaS Trends You Can't Afford to Ignore

Good morning MRR lovers,

If you’ve been looking for research and benchmarks on the latest SaaS trends, you will enjoy this issue. 😉

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• 📈 Investors prefer growth but not at all costs. Bessemer Venture Partners says that SaaS businesses with 100% revenue growth and a 1.2X burn multiple have the ideal growth profile.

• 🤯 Pando, a supply-chain SaaS startup, is growing rapidly and aims to be operationally profitable by the end of 2023 while expanding in North America.

• 🤔 Discover how to know when a company has reached strong product-market fit and why B2B SaaS businesses have a higher net retention rate vs. B2C SaaS businesses.

• 💸 +4 Funding Rounds

Fundability, Efficient Growth, and the Future of SaaS

Bessemer Venture Partners has released its State of the Cloud report for 2023, predicting that the year will be one of incredible transformation as AI continues to advance. Here are some of the topics that caught my attention:

• There is capital, but not necessarily for new companies. Despite record-high venture capital funding, much of the available funds are not completely dry and are reserved to support existing portfolio companies.

• There is no perfect time to fundraise. While public market valuations have adjusted in the past several months, private valuations have yet to normalize from the highs of 2021. Don't try to time the market, instead fundraise when capital is available. The best time to fundraise is when you do not need the money.

• Investors still prefer to see growth. Private venture-backed businesses do not need to immediately solve for cash flow break-even; they should be investing in growth. However, this growth should be at optimal costs, not growth-at-all-costs.

• According to Bessemer, the "ideal" growth profile for SaaS businesses involves 100% revenue growth and a 1.2X burn multiple.

• Related to that last point, one of Bessemer’s predictions for 2023 is that there will be a surge in adoption of SaaS solutions that help reduce inefficiency and optimize spending and procurement. Some examples of companies that are doing this include Cledara, Vertice, and Vendr.

• Bessemer is highly optimistic about the role of AI and machine learning in the cloud economy. A survey of the entire Bessemer investment team found that 96% of investors see portfolio companies with AI-driven features on the roadmap.

• This is not surprising, considering that ChatGPT became the fastest-growing consumer application in history.

• Would you like to read the full report? Click here.

Company Spotlight: Pando - The Supply Chain Powerhouse

• Pando is a supply-chain SaaS tech startup based in Chennai. The company was founded in 2018 and focuses on building an end-to-end platform based on AI, no code, and collaboration.

• It has over 50 large customers around the world, including Godrej, Honda, Johnson and Johnson, Accuride, Philips, Nestle, and ITC.

• The company has experienced tremendous growth. Having reached $4.4 million in annual recurring revenue in 2022, the company has now set its eyes on becoming operationally profitable by the end of 2023. It also aims to hire 150 more people and focus its expansion towards the North American market.

• What does the company do? Pando's Fulfillment Cloud provides a platform for manufacturers, retailers, and logistics companies to collaborate with suppliers and customers, enabling them to manage their deliveries end-to-end and help them optimize the process.

• What are the benefits for their customers? improved service levels, reduced carbon footprint and lower overall freight costs.

• Here’s a peek of their platform 👇

Net Retention Rates: What SaaS Founders Need to Know

• It is no secret that retention is critical for SaaS companies. It signals strong product-market fit, better growth, and a more capital-efficient business. Also, companies with higher net revenue retention often command higher valuations.

• Are you curious about how your company stacks up against the competition? Our friends at ChartMogul recently published their inaugural SaaS Retention Report — here are some of their key findings 👇

• More than half of SaaS businesses experienced lower retention rates in 2022 compared to 2021. This can be attributed to the challenging macroeconomic environment, which caused subscribers to reassess and reduce their SaaS spending.

• A net retention rate of over 100% indicates strong product-market fit. Amongst ARR ranges above $3m, a higher percentage of businesses have a net retention rate over 100%.

• SUPER IMPORTANT - a low net retention rate might be acceptable if: you are an early-stage SaaS startup in the pre-product-market fit phase; you have low or near-zero customer acquisition costs; or you operate in the B2C space.

• B2B SaaS businesses have a higher net retention rate than B2C SaaS businesses. Churn is higher and expansion is lower in B2C because individual customers tend to make knee-jerk buying decisions, and there are fewer opportunities for upselling and cross-selling.

• Note: If you’re having trouble reading the chart, note that lower ARPA companies tend to be B2C businesses, while higher ARPA companies tend tot be B2B.

• Expansion is the key driver of higher net retention at higher ARRs and ARPAs. As your business grows, not upselling or cross-selling to your existing customers means missing out on key growth opportunities.

• Access the full report here.

• Semgrep | $53m Series C: code scanning tool designed for both security and software engineers (link)

• Ampersand | $4.7m Seed: developer platform that lets SaaS engineers to create robust, customer-configurable, and scalable user-facing integrations (link)

• Primo | $3.4m: IT Operating System that allows companies to scale from 2 to 2000 employees (link)

• Loopin | $1.9m: staff well-being platform helping big employers and people-first managers better understand and support their employees (link)

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