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Brazil SaaS Landscape 2017 - First Edition

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Lessons from 400+ SaaS companies, in a first of a kind survey focused in Brazil. We are happy to announce the results of the first edition of the Brazil SaaS Landscape Research. We surveyed 597 respondents in May 2017. 49% of respondents were SaaS CEOs and that’s the segment we focused our research on. The report is a joint initiative by SaaSholic, Rock Content, Signal Hill & Redpoint eVentures.

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Brazil SaaS Landscape 2017 - First Edition

  1. 1. Brazil SaaS Landscape 2017: Lessons from a deep dive into 400+ Brazilian SaaS Startups
  2. 2. RESEARCH PARTNERSRESEARCH PRODUCERS
  3. 3. Welcome to the first edition of the Brazil SaaS Landscape! This research was developed by SaaSholic and Rock Content with support from Signal Hill and Redpoint eventures. In this first edition, we seek to collect data and understand growth, funding and focus to develop a better understanding of the local SaaS ecosystem. The research surveyed 597 respondents in May 2017. 49% of respondents were SaaS CEOs and that's the segment we focused our research on. We'd like to thank all partners and companies that helped promote and answer the survey. This will be very important for the development of our ecosystem and for future benchmarks. We're commited to make this an annual research so we can track this emerging startup category in Brazil. For feedback/suggestions, mail me at diego@rockcontent.com or Tweet at me at @dttg. All the best, Diego Gomes
  4. 4. KEY TAKEWAYS FROM OF BRAZIL SaaS LANDSCAPE 2017 #1 Enterprise SaaS companies in Brazil grow faster than B2C or SME focused startups; #2 60% of companies have more than R$1m ARR(˜ $300k) and take less than 6 months to recover CAC costs; #3 67% of companies have an LTV/CAC ratio superior to 3; #4 The Brazilian SaaS startup takes a median 2 years to get to R$1m ARR (˜$300k);
  5. 5. KEY TAKEWAYS FROM OF BRAZIL SaaS LANDSCAPE 2017 #5 Inside sales is the the preferred go-to market strategy of SaaS startups. field sales and channel sales are rated the most efficient; #6 26% of the companies surveyed have a marketplace component; #7 71% of the Brazilian SaaS startups are bootstrapped and have never raised any funding. #8 SaaS is still in is early stages in Brazil, but the companies are maturing and showing healthy unit economics.
  6. 6. Respondent Set#01 Business Focus#02 Growth Rates#03 Sales And Delivery#04 Profitability#05 Other Metrics#06 Funding#07 Participants & Sponsors#08 Connect with us!#09
  7. 7. RESPONDENT SET#01
  8. 8. #01 | RESPONDENT SET Companies' headquarters location
  9. 9. São Paulo is home to almost 50% of Brazilian SaaS companies. The states of Santa Catarina and Minas Gerais are second and third place, respectively.
  10. 10. #01 | RESPONDENT SET Companies who have reached over R$1M in ARR headquarters' state
  11. 11. São Paulo leads with 28 companies who have more than R$1M in ARR. Santa Catarina comes in 2nd with 11, and Minas Gerais in 3rd (7).
  12. 12. #01 | RESPONDENT SET Surveyed companies' current annual run rates (ARR) 1 BRL = 0.30 USD
  13. 13. #01 | RESPONDENT SET Surveyed companies' number of employees
  14. 14. #01 | RESPONDENT SET Number of customers
  15. 15. #01 | RESPONDENT SET When were the companies founded?
  16. 16. 54% of surveyed companies started their activities after 2013. 32% began in 2015.
  17. 17. #01 | RESPONDENT SET Number of customers / ARR median Number of customers Revenue (Median) Respondents Up to 100 From R$ 1M to R$ 5M 104 From 101 to 1000 From R$ 5M to R$ 10M 64 From 1001 to 10000 From R$ 5M to R$ 10M 26
  18. 18. #01 | RESPONDENT SET Months taken to launch the first SaaS product
  19. 19. #01 | RESPONDENT SET Was the company founded as SaaS or did it pivot to SaaS?
  20. 20. #01 | RESPONDENT SET Correlation between the company having been founded as SaaS or pivoted to SaaS, and time taken to launch 1st SaaS product Founded as SaaS Pivoted to SaaS
  21. 21. Companies founded as SaaS develop products with higher speed than those who pivoted to SaaS.
  22. 22. 35% of companies that pivoted to SaaS took more than 12 months to launch their product, in contrast to 20% of companies founded as SaaS.
  23. 23. KEY TAKEWAYS FROM RESPONDENT SET #1 31% of surveyed companies have already passed the mark of R$1M in ARR; #2 São Paulo houses the biggest population of SaaS companies, yet Santa Catarina and Minas Gerais also present a significant volume of SaaS companies. #3 If possible, start as SaaS: 35% of companies who pivoted to SaaS took more than 12 months to launch their product, in contrast to 20% of companies who were a SaaS from the very beginning.
  24. 24. BUSINESS FOCUS MARKET AND PRODUCT FOCUS OF THE RESPONDENTS #02
  25. 25. VERTICAL SaaS #1 Caters to a specific market segment; #2 E.g.: Referral software for online retail HORIZONTAL SaaS #1 Caters to multiple industries and focus on selling for a specific department inside a company. #2 E.g.: Content marketing software that focuses in marketing departments. #02 | BUSINESS FOCUS Vertical x Horizontal SaaS
  26. 26. #02 | BUSINESS FOCUS Vertical x Horizontal SaaS
  27. 27. #02 | BUSINESS FOCUS Industry in which the business focuses on
  28. 28. Retail is the industry that consumes more SaaS products, followed by Tech/Telecom.
  29. 29. #02 | BUSINESS FOCUS Client department in which the business' offer focuses on
  30. 30. Management, Finance and Tech are the departments inside a company that consume more SaaS products.
  31. 31. #02 | BUSINESS FOCUS Does your company have a marketplace component besides the SaaS component? Pure Play SaaS SaaS enabled Marketplace (5k+ creators)
  32. 32. #02 | BUSINESS FOCUS Correlation between Marketplace component and ARR
  33. 33. Among the companies who have reached R$1M ARR, 24% of them have a Marketplace component.
  34. 34. #02 | BUSINESS FOCUS Customer focus of Brazilian SaaS companies
  35. 35. 81% of surveyed companies sell to SMBs, and only 33% focus on enterprise companies.
  36. 36. KEY TAKEWAYS FROM BUSINESS FOCUS SECTION #1 56% of SaaS companies with over R$1M in ARR have a horizontal focus, while 44% focus on a specific industry; #2 Most companies focus on SMBs. In fact, 81% of Brazilian SaaS have SMBs as their primary focus; #3 Around 24% of Brazilian SaaS companies with over R$1M in ARR have a marketplace component.
  37. 37. GROWTH RATES GROWTH PROFILE OF THE RESPONDENT SET #03
  38. 38. #03 | GROWTH RATES ARR growth in companies with ARR under R$1M between 2015 and 2016
  39. 39. 42% of companies with ARR under R$1M forecast a growth of over 100% in 2017.
  40. 40. #03 | GROWTH RATES ARR growth in companies with ARR over R$1M between 2015 and 2016
  41. 41. 53% of companies with ARR >R$1M forecast a growth of over 100% in 2017.
  42. 42. #03 | GROWTH RATES ARR and growth between 2015 and 2016
  43. 43. Only 33% of SaaS companies are able to grow more than 100% a year after they reach R$10M ARR.
  44. 44. #03 | GROWTH RATES Customer profile and growth between 2015 and 2016
  45. 45. Companies that focus on enterprise customers grow at a higher speed. 57% had a growth rate of over 100% in 2016, in contrast to 46% of those who focus on SMB.
  46. 46. #03 | GROWTH RATES Time taken to reach R$1M in ARR
  47. 47. Only 13% of all companies reached the first R$1M in ARR in less than 12 months. The majority (36%) takes 2 to 4 years to reach R$1M in ARR.
  48. 48. KEY TAKEWAYS FROM GROWTH RATES SECTION #1 Companies that focus on the enterprise market grow at a higher speed. Over 57% of them saw a growth rate of over 100% in 2016, while those that focus on SMB grew 46% YoY. #2 After R$10M in ARR, companies face greater hardships in growth. Only 33% are able to grow over 100% YoY.
  49. 49. SALES AND DELIVERY CHANNELS AND DELIVERY METHODS #04
  50. 50. #04 | SALES AND DELIVERY Sales channels used
  51. 51. Inside Sales is the most used sales model, followed by field sales. Only 18% of surveyed companies use channel sales.
  52. 52. #04 | SALES AND DELIVERY Most efficient sales channels according to respondents
  53. 53. However, field sales and channel sales are considered the most efficient distribution models by surveyed companies.
  54. 54. #04 | SALES AND DELIVERY Average commission for the primary sales channel (As % of ACV)
  55. 55. Most companies pay up to 10% of the contract value in commissions. 32% don't adopt commissions at all.
  56. 56. #04 | SALES AND DELIVERY Most used distribution channels used by companies with high ARR growth
  57. 57. Inside Sales is the favorite sales model for high growth companies. Self Service Sales and Field Sales are tied in second place.
  58. 58. KEY TAKEWAYS FROM SALES & DELIVERY SECTION #1 Inside sales is the favorite sales strategy for companies, and the most common one used by high-growth companies (Growth >100% YoY); #2 However, field sales and channel sales are considered the most efficient. #3 Despite its efficiency, the adoption of channel sales is still low (18%). #4 The low efficiency of self-service sales highlighted by respondents can be an indication that the Brazilian consumer still looks for a human element on the buying process.
  59. 59. PROFITABILITY COSTS AND MARGIN DRIVERS OF RESPONDENTS #05
  60. 60. #05 | PROFITABILITY Largest components of the company's cost structure
  61. 61. R&D, marketing/sales and support/CS are the largest components of the cost structure of a SaaS company.
  62. 62. #05 | PROFITABILITY Customer Acquisition Cost (CAC) in R$
  63. 63. 58% of companies spend less than R$1K to acquire a new customer.
  64. 64. #05 | PROFITABILITY Customer Acquisition Cost (CAC) in R$ by ARR < 1m ARR > 1m ARR
  65. 65. 17% of companies with less than R$1M in ARR don't measure their CAC, in contrast to 10,3% of those with ARR over R$1M.
  66. 66. A company's CAC increases with ARR growth. 54% of companies with revenue under R$1M ARR have a CAC lower than R$1,000, in contrast to 34% of companies with over R$1M ARR.
  67. 67. #05 | PROFITABILITY Number of months to recover CAC for companies with ARR over R$1M
  68. 68. Over 60% of companies (>R$1M ARR) recover their CAC in less than 6 months.
  69. 69. #05 | PROFITABILITY Annual Contract Value (ACV)
  70. 70. Over 50% of surveyed companies have annual contract values of less than R$5K.
  71. 71. #05 | PROFITABILITY Customer Focus Median ACV Respondents Individual <R$5k 21 SMB R$15-25k 165 Enterprise R$50-100K 66 Average ACV by customer profile
  72. 72. #06 | OTHER METRICS Main metric used for pricing variation
  73. 73. #05 | PROFITABILITY Gross margin of SaaS offerings
  74. 74. The median gross margin a SaaS in Brazil is between 70-80%.
  75. 75. #05 | PROFITABILITY Time expected to reach break even
  76. 76. Over 50% of surveyed companies have reached break even. Almost 40% expect to reach it in less than 24 months.
  77. 77. KEY TAKEWAYS FROM PROFITABILITY SECTION #1 Brazilian companies don't operate as leveraged as the American market. Over 50% of the country's companies recover their CAC in less than 6 months. #2 Over 50% of companies find themselves in break even and 40% expect to reach it within the next 24 months. #3 The SaaS service margins in Brazil are aligned with American benchmarks, between 70-80%; #4 CAC increases significantly after the first R$1M ARR.
  78. 78. OTHER METRICS SaaS KPIs#06
  79. 79. #06 | OTHER METRICS Lifetime Value of SaaS customers
  80. 80. The median LTV of a SaaS in Brazil is 37 to 48 months.
  81. 81. #06 | OTHER METRICS Average monthly logo churn Median: 4-5%
  82. 82. #06 | OTHER METRICS Average monthly revenue churn Median: 3-4%
  83. 83. 30% of companies don't measure revenue churn, and only 18% get to negative revenue churn.
  84. 84. The median revenue churn in Brazilian companies is 3-4%.
  85. 85. #06 | OTHER METRICS Contract periods used by companies
  86. 86. Monthly contracts are still the rule, although annual contracts are adopted by 34% of companies.
  87. 87. #06 | OTHER METRICS LTV/CAC for companies with ARR over R$1M
  88. 88. 67% of surveyed companies have a ratio of LTV/CAC > 3.
  89. 89. #06 | OTHER METRICS Average Net Promoter Score x ARR
  90. 90. No company with an NPS under 30 has passed the mark of R$10M ARR!
  91. 91. #06 | OTHER METRICS Average Net Promoter Score x Monthly revenue churn
  92. 92. There is a clear correlation between NPS and Churn. 48% of companies with an NPS above 70 have negative revenue churn.
  93. 93. KEY TAKEWAYS FROM METRICS SECTION #1 67% of surveyed companies have a ratio of LTV/CAC > 3. David Skok would be proud of us Brazilians. ;) #2 The median monthly revenue churn for surveyed companies is 3-4%; #3 The median monthly logo churn for surveyed companies is 4-5%; #4 The median LTV is 37-48 months. #5 Companies that focus on SMBs tend to have an ACV that lies in between R$15-25K, in contrast to ACVs of R$50-100K on the enterprise segment.
  94. 94. FUNDING FUNDING AND VALUATION#07
  95. 95. #07 | OTHER METRICS Fundraising by the company
  96. 96. SaaS and Bootstrapping seem to work well together in Brazil. 71% of companies have never raised funds.
  97. 97. #07 | OTHER METRICS Venture capital investment raised by the company (up to May '17).
  98. 98. Only 10,4% have raised over R$10M.
  99. 99. #07 | OTHER METRICS Valuation: Multiple of ARR
  100. 100. The median of SaaS valuations in Brazil is between 6 to 8X ARR.
  101. 101. #07 | OTHER METRICS Venture capital investment raised by the company up to May '17 x ARR
  102. 102. Over 50% of Brazil's Series A are between the multiples of 6-8X ARR. Among our sample, no Series B or C investment had an ARR multiple above 6x.
  103. 103. KEY TAKEWAYS FROM FUNDING SECTION #1 71% of surveyed companies are bootstrapped. They are more like mountain goats (or cockroaches) than unicorns. Not magical, but reliable and resilient. #2 Only 10% of companies have raised over R$10M in funding; #3 The median ARR multiple for SaaS valuations is 6X; #4 The median for Series A rounds is between 6-8X; #5 No Series B or C round had a multiple above 6X; #6 The favorite VCs of SaaS entrepreneurs are: Redpoint eVentures, Monashees Capital e Astella Investimentos.
  104. 104. PARTICIPANTS SOME OF OUR SURVEY PARTICIPANTS #08
  105. 105. ABOUT THE AUTHORS#09
  106. 106. Diego Gomes | @dttg Co-founder of Rock Content, SaaS enthusiast and curator of the blog SaaSholic. Data Analysis: Juliana Ribas Research Partners:
  107. 107. SaaSholic is a community for Brazilian SaaS entrepreneurs. Its content is curated by Diego Gomes. http://saas.webholic.com.br Signal Hill is a boutique of private investments and M&A focused on helping companies in growth stages. http://signalhill.com Redpoint eventures is a Venture capital fund that focuses on Internet in the Brazilian market. http://rpev.com.br Rock Content is the leader in content marketing for Latin America. http://rockcontent.com
  108. 108. #09 | ABOUT THE AUTHORS Special Thanks: Companies that supported this research
  109. 109. #09 | ABOUT THE AUTHORS Special Thanks: People that supported this research And dozens of entrepreneurs who helped crafting the survey NISHANT MALHOTRA RODRIGO BAER SURESH SAMBANDAM MANOEL LEMOS
  110. 110. Stay in touch with the Brazilian SaaS market! Read our blog: saasholic.com Sign up for our monthly newsletter to get the latest news.
  111. 111. THANKS! :)

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