State of SaaS in Finland 2018 survey report

State of SaaS
2018
Survey report of
99 revenue generating
Finnish B2B SaaS companies

Vendep Capital is the only pure SaaS investor in
Finland, investing from its €36M pre-A venture
fund (2017 vintage). The firm was founded by
three partners who have complementary back-
grounds as entrepreneurs, investors and general
managers and who have invested together since
2011.

Vendep invests in the best SaaS teams in Finland
(marketplaces and b2b software) when early
metrics show market validation abroad and the
team has a solid plan for scaling further. Typically,
the initial investment goes into marketing and
sales and establishing operations in the European
HUBs (London, Berlin, Amsterdam) or in the US.
2 3State of SaaS 2018 State of SaaS 2018
VENDEP CAPITAL
Vendep
Capital

Business Finland is the most important public inno-
vation funding and internationalization partner in
Finland for the global software industry. Business
Finland has decades of experience in accelerating
the Finnish software industry in tight coopera-
tion with companies, research organizations and
interest groups. Business Finland provides software
companies registered in Finland e.g. funding for
market surveys and R&D, organizes international
fair visits and offers data from target markets,
attracts private investments and builds global soft-
ware ecosystems in Finland.
Business
Finland

The Finnish Software Industry and Entrepreneur
Association (Ohjelmistoyrittäjät ry) is the only Finn-
ish association that actively offers high standard
trainings, quality seminars, and interesting net-
working opportunities to its members. The commu-
nity helps over 600 members to do their business
easier, better, and more effectively.
Ohjelmisto-
yrittäjät ry

This report analyses the results of a survey of Finn-
ish SaaS companies conducted in June-July 2018. It
represents responses from 99 executives of reve-
nue generating businesses using 2017 figures. This
report is intended as the first of an annual series
of studies on the state of Finnish SaaS businesses.
Sign up for the next survey at www.stateofsaas.fi
About
the survey

Most survey respondents (72%) reside in the capi-
tal region, primarily in Helsinki and Espoo.
The Tampere region had the largest respondents in
terms of revenue and employees.
Finnish SaaS startups by HQ location
60
45
30
15
0
%
HQs
revenue
employees
Helsinki Espoo Tampere Turku Oulu Jyväskylä Other
HQ
Location
Respondents: 99

Unsurprisingly, as companies raise capital, the me-
dian ownership of the operative team diminishes.
Up to
0,5Me
0,5–1Me 1–2Me 2–3Me Over
3Me
90
80
70
60
50
40
30
20
10
0
%
Median ownership of the operative team vs. capital raised
Ownership of the operative team
Raised
capital
80%
70%
57%
47%
31%
Ownership
Respondents: 99

Most companies list Europe and the US as their
target markets.
Notably, the Asia-Pacific region is the primary mar-
ket for only a few respondents (6%) and a future
market for 14% of respondents.
Now
In the future
Respondents
Target markets
Europe
North America
Asia-Pacific
Africa
Latin America
Middle East
0 10 20 30 40 50 60
Target
Markets
Respondents: 99

The 99 respondents of the survey had 1 200 em-
ployees in Finland and 500 abroad (29%). In total,
38% work in R&D and 41% in sales &
marketing.
other
admin
marketing
sales
R&D
0–300 ke 300 k–1 Me 1–2,5 Me 2,5 Me+ All
Employee distribution among ARR categories
100
75
50
25
0
%
Employment
Respondents: 88 (0–300ke: 46, 300k–1Me: 21, 1–2,5Me: 12, 2,5Me+: 9)

Companies in the top quartile grow almost twice
as fast as the median company.
Surprisingly, respondents with 1-2.5Me ARR grow
the slowest. This group spends the same amount
(40-50%) of ARR on sales as the next smaller and
the next larger group.
0–300ke 300k–1Me 1–2,5Me 2,5Me+ All
0–300ke 300k–1Me 1–2,5Me 2,5Me+ All
Median growth rate and top quartile
Sales & marketing spend per ARR category
250
200
150
100
50
0
1,80
1,60
1,40
1,20
1,00
0,80
0,60
0,40
0,20
0,00
90%
80
70
60
50
40
30
20
10
0
ARR growth rate
Median S&M spend, M eur
MedianS&Mspendas%ofARR
%
Median growth rate
Top quartile
100%
114%
25%
56%
67%
147%
213%
58%
75%
137%
Marketing spend
Sales spend
S&M as % of ARR
ARR Growth

Unsurprisingly, the growth rate correlates with
sales & marketing spend.
The fastest growing group (200%+) were internet
companies with lower customer acquisition costs
and consisting mostly of respondents with less
than 400ke in ARR.
0–25% 25–50% 50–100% 100–200% 200%+ Growth
rate, %
Sales & marketing spend vs. growth rate
70
60
50
40
30
20
10
0
S&M spend per ARR%
Sales and
Marketing
Spend
Respondents: 67 (0–25%: 16, 25–50%: 11, 50–100%: 11, 100–200%: 17, 200%: 13)

Companies in the top quartile grow 91% or more
irrespective of the acquisition channel.
Unsurprisingly, internet sales have the highest
growth and churn.
Channel Field Inside sales Internet Mixed All
Channel Field Inside sales Internet Mixed All
Median growth rate vs. sales strategy
Euro churn vs. sales strategy
91%
300
250
200
150
100
50
0
ARR growth rate%
40
35
30
25
20
15
10
5
0
Median annual euro churn%
128%
61%
9%
60%
137%
100% 100%
253%
73%
133%
38%
67%
Median growth rate
Top quartile
7%
17%
38%
9%
13%
Sales
Strategy
and
Churn
Respondents: 68 (Channel: 6, Field: 26, Inside: 10, Internet: 13, Mixed: 13)

Companies in the top quartile grow 100% or more
irrespective of the customer segment.
50% of companies target mid and enterprise cus-
tomers.
Growth is fastest and churn highest in the smallest
customer segment.
Very Small
& Small
Small & Mid Mid &
Enterprise
Enterprise All
Very Small
& Small
Small & Mid Mid &
Enterprise
Enterprise All
Median growth rate and top quartile vs. target customers
Annual contract value and churn vs. target customers
35%
30
25
20
15
10
5
0
Annualchurn%
250
200
150
100
50
0
12 000
10 000
8 000
6 000
4 000
2 000
0
ARR growth rate
ACV (ARR/Paying customers)
%
165%
Median growth rate
Top quartile
Median ACV
Median churn
142%
100%
200%
137%
67%67%
100%
65%
90%
Customer
Segments
Respondents: 81 (Very Small & Small: 15, Small & Mid: 23, Mid & Enterprise: 26, Enterprise: 17)

According to the survey results, the smallest con-
tracts have significant churn and make it difficult
to grow efficiently.
Respondents have a relatively high median churn
of 13%.
The long-term and, for larger companies, a good
target euro churn rate is 5-7% annually.
Key Bank’s 2017 SaaS Survey of >5M USD ARR
companies showed a median dollar churn of 8%
annually.
<1ke 1–5ke 5–10ke 10–20ke 20ke+ All
Median euro churn vs. contract size
45
40
35
30
25
20
15
10
5
0
%
Churn Rate
Respondents: 79 (<1ke: 9, 1–5ke: 29, 5–10ke: 17, 10–20ke: 12, 20ke+: 12)

Respondents in the ARR range of 1-2.5Me grow
slowest (25%) and generate 90% of their ARR from
Finland.
They also have the lowest euro and logo churn
rates (5-6%).
0–300ke 300k–1Me 1–2,5Me 2,5Me+ All
Finnish revenues and growth rate
Euro and logo churn
120
100
80
60
40
20
0
%
35
30
25
20
15
10
5
0
%
0–300ke 300k–1Me 1–2,5Me 2,5Me+ All
Median % ARR from FI
Median growth rate
Median euro churn
Median logo churn
100%
90%
33%
90%
85%
60%
30%
20%
12%
6%
12% 12%
8%
5%
13% 13%
Finnish
Market

As highlighted, 26% of respondents spend over 2
euros to get 1 euro in ARR.
Less than one year is a good payback time for cus-
tomer aquisition costs (CAC)*, as achieved by 28%
of respondents who spend 1 euro to get 1 euro in
ARR.
The CAC payback time varies greatly among the
different ARR categories. The secret to a low
payback time for companies with 300k-1M ARR is
their relatively low S&M spend. This is likely due to
finding a repeatable model but lacking the funds
to invest in it (90% looking for funding in the next
12 months).
*forentrepreneurs.com/saas-metrics
4+
2,5–4
2–2,5
1,5–2
1–1,5
0,5–1
–0,5
2,00
1,50
1,00
0,50
0
Euros spent for each euro in ARR
Respondents
Internet
Channel
Inside
Mixed
Field 0–
300ke
300–
1Me
1–
2,5Me+
2,5Me+ All
0 2 4 6 8 10 12 14 16 18
Payback time, years2,00
1,50
1,00
0,50
0
Payback time, years
How many euros spent for sales and marketing for
each euros in revenue?
CAC payback time by
primary mode of customer
acquisition
CAC payback time by
ARR category
CAC Payback
Time
Respondents: 77 (Internet: 10, Channel: 6, Inside: 12, Mixed: 20, Field: 29)
Respondents: 82 (0–300ke: 41, 300ke–1Me: 21, 1–2,5Me: 11, 2,5Me+: 9)

Respondents mainly signed contracts that are 12
months or longer (70%).
12m+
12m
4–11m
2–3m
1 month
<1ke 1–5ke 5–10ke 10–20ke 20ke+
Contract length vs. contract size
100
90
80
70
60
50
40
30
20
10
0
%
Average
annual
contract
value
Contract
Lenght
Respondents: 84 (<1ke: 11, 1–5ke: 29, 5–10ke: 18, 10–20ke: 13, 20ke+: 13)

Sales and scaling to new markets are the biggest
issues.
Issues, predefined answers
Sales
Scaling to new
markets
Marketing
Raising funds
Finding product
market fit
Customer success
HR
Admin
0 10 20 30 40 50 60 70%
Issues 1

Unsurprisingly, sales, recruiting sales people and
entering new markets are difficult issues for the
respondents.
Sales process
(lead sourcing,
partners, channels)
Recruiting sales &
marketing
Entering
new markets
Recruiting
developers
Availibility
of capital/
fund raising
Raising funding
without
significant traction
Issues, open answers
0 5 10 15 20 25 30 35 40%
Issues 2
Respondents: 79

AWS is the clear market leader among Finnish SaaS
companies as a cloud service provider.
Self-managed servers are used by 18% of the re-
spondents to run their SaaS business.
AWS
34%
Cloud hosting
Microsoft
15%Google
15%
3rd party
14%
Self-
managed
18%
Other
11%Cloud
Hosting
Respondents: 96

A SaaS company with early traction has raised
already 100ke since incorporation. The median
growth rate is 100% with a 33% churn rate. The
field sales model dominates with 2 people in-
volved in sales and marketing out of 5 total.
42% of these companies list scaling abroad as one
of their biggest challenges. 90% of the revenue
comes from Finland, with services bringing in an
additional 25% in revenue. The median ownership
by the operative team is 75%.
Category Profile:
0–300Ke ARR

Category Profile:
300K–1Me ARR
A SaaS company with early foreign traction has
raised over 400ke within 5 years since incorpora-
tion. The median growth is high at 114% with low
churn. No individual sales model stands out, with 3
people involved in sales marketing out of 10.
Already 40% of the revenue is coming from
non-domestic customers, with only a fraction com-
ing from services. The median ownership by the
operative team is 60%. Half of these companies list
scaling abroad as one of their biggest challenges.

Category Profile:
1–2.5Me ARR
This revenue range is an oddity among the re-
spondents. In striking contrast to the other cate-
gories, 90% of the revenue comes from domestic
customers. This has some direct consequences: The
median euro churn is low (3% annually) but so is
growth (25% annually). Capital raised varies from
0 to 2.2Me, but 54% have raised nothing. Owner-
ship by the operative team is 63%, which is slightly
higher than among smaller companies. Services
make up 10% of revenues.
Perhaps unsurprisingly, 3 out of 4 companies list
scaling abroad as one of their biggest challeng-
es. They’ve raised a median amount of 1.4Me of
capital. 85% ot the 23 employees are located in
Finland.

Category Profile:
2.5Me+ ARR
The largest companies surveyed follow the trend
set by smaller companies: The annual euro churn
is around 10%, with 70% of the revenue coming
from abroad. 60% target enterprise customers
with field and inside sales model.
56% of the median 43 employees are in sales and
marketing, with 70% of the workforce residing in
Finland. These companies have raised over 3Me in
financing in their 7 years in the market.

Survey
Partners

50 State of SaaS 2018
Any surprises?
Come join the discussion on the results!
Join the conversation fb.me/stateofsaas
@stateofsaas

Layout and infographics: Liisa Valtonen

State of SaaS in Finland 2018 survey report

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to State of SaaS in Finland 2018 survey report

Similar to State of SaaS in Finland 2018 survey report (20)

Recently uploaded

Recently uploaded (20)

State of SaaS in Finland 2018 survey report