The document summarizes key findings from the 2013 Pacific Crest SaaS Survey. It finds that the SaaS industry is experiencing rapid growth driven by cloud adoption and mobility. Companies are shifting to lower-cost customer acquisition channels like trials and renewals/upsells. This has increased revenue churn but leveraging existing customers through upsells is highly profitable. The optimal strategy is engaging customers through a personalized success approach to support continuous growth.

1. PAUL PHILP, FOUNDER & CEO
paul@getamity.com
Evolving SaaS Economics:
The Strategic Role of Customer Success
An analysis of the Pacific Crest 2013 SaaS Survey.
SEPTEMBER 2013

2. Analysis
Selected Slides from the Survey
© 2013 Amity
Pacific Crest, along with David Skok of Matrix
Partners, has conducted an annual survey of private
SaaS companies since 2010. Pacific Crest is an
investment banking firm with a strong focus on SaaS.
David Skok is a highly respected authority in the
SaaS industry.
http://www.pac
news.com/saa
You can download the original survey at:
http://www.pacificcrest-news.com/SaaS/

3. Pacific Crest Survey Analysis
Industry Growth
Acquisition Channels
ACV: New customers vs. renewals vs. upsells
Trial-based ACV
Commissions
Average Deal Size
Contract sizes and billing cycles
Pricing Metrics
Churn
© 2013 Amity

4. The SaaS Industry’s Growth is Accelerating
Driven by broad adoption of the cloud, and mobile.
© 2013 Amity

5. Use of Low Cost Acquisition Channel is Accelerating
‘Land and expand’ and organic growth gaining momentum.
© 2013 Amity

6. Low Cost Channels are Expanding
The SaaS model is bifurcating into high cost and low cost strategies.
67%
13%
65%
29%
6%
38%
54%
8%
25%
75%
100%
2011 2013 2011 2013 2011 2013 2011 2013 2011 2013
© 2013 Amity

7. New Customer Revenue is Expensive
Upselling or renewing takes a fraction of the cost.
© 2013 Amity

8. Renewing Revenue is Highly Profitable
Leveraging existing customer base the key to profitability.
Remember:
$1.00 upsell ACV costs
$0.17.
$1.00 new customer ACV
costs $0.92.
If a company is getting
25% of new ACV thru
upsells, then for $1MM
new ACV:
$250,000 costs $42,500;
$750,000 costs$690,000.
ROI:
588% vs 109%.
© 2013 Amity
Average excluding
smallest companies:
20%

9. Fast Growth SaaS Leverages the Customer Base
Faster growth at a lower cost.
© 2013 Amity

10. Trials Generate One Third of All New ACV
1/4 to 2/3 of respondents use trials of some sort.
In 2011, trials
accounted for
~19% of new
ACV.
© 2013 Amity

11. Renewal Commissions now Standard Practice
Recognizing the profitability of renewals and upsells.
2012:
50%
© 2013 Amity

12. Average Deal Size is Getting Smaller
Consistent with the shift to lower-cost CAC.
2011 Median: $37.5K
2012 Median: $24K
© 2013 Amity

13. Customer cash flow is at increased risk.
Average billing period has dropped significantly since 2012.
2012: Average
Billing Period
was one year.
© 2013 Amity

14. 2/3 of Revenue is Consumption-based
At risk.
© 2013 Amity

15. Revenue Churn Has Almost Doubled
Consistent with lower-cost acquisition, smaller deal size and consumption-based pricing.
2011 Median: 5%
2012 Median: 5%
© 2013 Amity
It is interesting
that only 66 out
of 94 possible
respondents
answered this
question.
Could it be the
rest don’t know
their churn rate?

16. Lower Cost Channels have Higher Churn
The industry is moving to lower-cost channels, so churn is rising across the industry.
© 2013 Amity
We suspect that
‘Internet Sales’ is
even higher –
there were only 5
responses.

17. What the Data Tells Us
The SaaS model continues to evolve.
© 2013 Amity
SaaS growth is accelerating
Driven by adoption of the cloud, and mobile.
90% growth rate by internet distributors.
Use of low cost acquisition is
accelerating
Model is splitting into high- and low-cost
strategies.
Trials generate one third of new ACV 1/4 to 2/3 of respondents use trials.
Average Deal Size is getting smaller SMB and VSB fastest growing segments.
Leveraging customer base is key to
profitability and growth
Renewing revenue is highly profitable.
On average, companies are realizing
20% of new ACV from upsells.
The fastest-growing companies are
significantly higher: up to 35%.
Renewal commissions now standard 50% paid in 2012, increased to 76% in 2013.
Revenue churn has almost doubled Lower cost channels have higher churn.
Customer cash flow is at increased risk
Billing period has dropped from one year in
2012 to 3 months in 2013.
2/3 of revenue is consumption-based.

18. Conclusions
SaaS 1.0: Enterprise
Complex, top-down, cost-
focused.
SaaS 2.0: Personal
Accessible, engaged,
organic.
Economic
drivers
Empowered buyers Empowered users
Business
strategy
Replace on-premise
products en masse
Land, expand and organic
growth
Value
proposition
Reduce costs Collaborate and engage
Customer
acquisition
Complex contracts Easy to try, easy to buy
Customer
relationship
Break/fix: high complexity,
low engagement
Low complexity, high
engagement
Customer
development
Contract-based, negotiated Continuous and organic
Business
application
stack
Siloed
Product and business
alignment
We are witnessing an industry transformation:
© 2013 Amity

19. 1. Generate Product Qualified Leads:
Lower barriers to evaluation and adoption.
2. Use Inbound Marketing and Inside Sales:
Focus on lower cost customer acquisition methods.
3. Align Product and Business:
Horizontal layers over Departmental silos.
4. Focus on Personal Customer Success:
High-engagement, personal service builds trust.
5. Scale Customer Engagement:
Enable employee-to-people engagement throughout the customer journey.
Easy to try, easy to buy, easy to engage.
© 2013 Amity
Competing in the Next SaaS Wave

20. helps SaaS companies keep and grow their customers
by:
Removing time-wasting complexity from the customer success process, and
Enabling customer-facing teams to spend more time engaging customers.
Customer Success. Simplified.
© 2013 Amity
provides
the only scalable
customer
engagement
platform purpose-
built for SaaS.
www.getamity.com
@getamity

21. For more information contact:
Paul Philp, Founder & CEO
paul@getamity.com
647.927.8574
Thank You!