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completely theoretically with nice round numbers, let's say a SaaS company has $50m in annual revenue, and they want to grow to $100m in annual revenue next yea
by pkrein 9y ago
completely theoretically with nice round numbers, let's say a SaaS company has $50m in annual revenue, and they want to grow to $100m in annual revenue next year. lastly, let's assume time required to pay back the cost of customer acquisition (marketing, sales, setup support) is 24 months, and customers always pay annually up front. (24 months is kind of a long payback time, so this is a bit extreme.)
doing the math... you have $50m in revenue so you can buy another $25m in recurring revenue with that. and then you need another $50m in capital from somewhere to add the other $25m in recurring revenue to get to $100m ARR total.
it also follows from the math above that the faster you grow revenue, the more capital you need. :) saas math is a bit funky.
- jgalt212 9y agofair enough, but sometimes no matter how much you spend you won't be able to double revenues from $50MM to $100MM. Will the market allow you to grow that fast? So yes, the math is funky. As a counter example, many companies are using excess cash to buy back stock and not grow the biz. As another example, what did Github did with their $100MM? I'd argue that the Github product and client base looks substantially similar to what it did before a16z gave them that chunk of change.