Webinar: The SaaS metrics that matter in 2023

JUL 04, 2023

BY Dave Kellogg

Our latest webinar looks at the SaaS metrics that matter in 2023, emphasising the set of top-ten SaaS metrics that investors are examining in today's environment.

Bringing both an operator and an investor lens to the topic, in this webinar Dave and Michael discuss:

  • How investors and operators see metrics differently
  • The importance of understanding the data set behind SaaS metrics -- e.g., whether you are looking at VC-backed, PE-backed, or bootstrapped companies can have a large effect on where the benchmark bar is set
  • Common variants on the metrics (e.g., CAC ratio vs. magic number, growth retention vs. T2D3)
  • How metrics have waxed and waned in terms of popularity (e.g., burn multiple is on the rise along with GRR)
  • The proper interpretation of SaaS metrics (e.g., what does CPP actually measure)
  • Where and how metrics are used a predictors (e.g., R40 predicting enterprise value multiple, cash conversion score predicting investment IRR)

The SaaS metrics that matter in 2023

Get to know the top ten metrics investors are examining in the current climate.

View slides

Webinar hosted by Dave Kellogg, Executive In Residence, alongside Michael Lavner, Principal

While many of the top ten are familiar SaaS metrics (e.g., ARR growth, CAC payback period), some of the list include metrics that investors have previously either not examined or placed in a lower tier (e.g., burn multiple, gross retention rate). The change in emphasis is a result of the change in markets, generally moving towards sustainable-growth models in favour of the growth-at-all-costs models of the recent past.

The top ten metrics that matter in 2023 are:
  1. ARR growth, ultimately a measure of a SaaS company is interesting to investors.
  2. Free cash flow margin (FCF), increasingly the preferred measure of SaaS company profitability
  3. Rule of 40 score (R40), a measure of a company's balance growth and profitability
  4. Subscription gross margin, which measures the profitability of delivering the SaaS service
  5. Burn multiple, an all-in efficiency measure, which calculates the cost of increasing ending ARR by $1.
  6. ARR/FTE, a productivity measure which compares a company's ARR base to its employee headcount
  7. CAC ratio, the sales and marketing (S&M) cost of selling $1 in new ARR
  8. CAC payback period (CPP), months of subscription gross profit to replay the S&M cost of customer acquisition
  9. Net revenue retention (NRR), the one-year expansion of a cohort of customers
  10. Gross revenue retention (GRR), the one-year change in a cohort of customers, excluding expansion
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