2019 Expansion SaaS Benchmarks Report

1. 1O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 2019 2019 EXPANSION SAAS BENCHMARKS View the interactive report at saasbenchmarks.com WEBINAR

3. Our mission is to improve people’s working lives. We do this by: • Investing in the best software companies. • Helping our portfolio companies accelerate growth and become market leaders. Learn more at ov.vc THE EXPANSION STAGE SOFTWARE VC

4. 4O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved BENCHMARK STUDY OVERVIEW 639 enterprise software companies participated in the survey, including a mix by company size (<$1M ARR to $50M+ ARR), software category (infrastructure, application, etc.), and geography. ~70% of participants were CEOs, CFOs, or VPs of Finance at their respective company.

5. 5O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved US, 56% Europe, 20% Canada, 11% APAC, 7% Other, 6% Less than $1M, 26% $1-2.5M, 14% $2.5-10M, 27% $10-20M, 13% $20-50M, 11% More than $50M, 9% DISTRIBUTION BY GEOGRAPHY DISTRIBUTION BY ARR Source: 2019 OpenView SaaS Metrics Survey, N=639.

7. 7O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved KEY SAAS PERFORMANCE METRICS S I Z E A N D G R O W T H Employees Number of full-time equivalent employees. Funding Amount of equity capital raised to date. YoY Growth Rate Change in annual recurring revenue. F I N A N C I A L Monthly Burn Rate (in 000’s) Net monthly burn rate basis (total $ lost each month, negative values = profit). Sales & Marketing Spend Spending on Sales & Marketing, including headcount, as a % of year-end ARR. R&D Spend Spending on R&D, including headcount, as a % of year-end ARR. S A A S V A L U E D R I V E R S CAC Payback (Months) Months of subscription gross margin to recover the fully loaded cost of acquiring a customer. Logo Retention Annual logo retention seen in cohorts. Net Dollar Retention Annual net dollar retention (after upsells & expansion) seen in cohorts.

8. 8O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 8Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved HEADCOUNT: DO YOU HAVE THE RIGHT ORG TO SUPPORT GROWTH? In the early stages, companies have one employee for every $100,000 in ARR. As companies scale to $20M, that figure jumps to $150,000. Best-in-class is $200,000+. On average, 31% of employees are in Engineering and another 20% are in Sales. The next largest functions are Customer Success (15%) and Product (11%). Source: 2019 OpenView SaaS Metrics Survey, N=639 ARR Scale 0 100 200 300 400 500 600 700 800 Less than $1M $1-2.5M $2.5-10M $10-20M $20-50M More than $50M Median Third Quartile Employee count (FTE)

9. 9O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 9Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved FUNDING: LATER STAGE COMPANIES ARE RAISING RECORD ROUNDS Capital raised among companies under $20M in ARR is nearly unchanged from last year. We have observed a spike in capital raised among later stage companies. The top quartile of companies are raising $100M and beyond to outpace their peers. This coincides with the rise of VC growth funds, PE firms going down market, mega-rounds and record- breaking fund sizes. ARR Scale Funds Raised ($M USD) Source: 2019 OpenView SaaS Metrics Survey, N=639 $0 $20 $40 $60 $80 $100 Less than $1M $1-2.5M $2.5-10M $10-20M $20-50M More than $50M Median Third Quartile 2018 Median

10. 10O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 10Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved GROWTH: HOW FAST IS FAST ENOUGH? SaaS companies grow rapidly in the early stages – a typical company doubles YoY and a top quartile company nearly triples. Revenue growth tends to decrease as companies approach $10M in ARR. Growth rates are relatively unchanged compared to 2018 despite increased fundraising and burn levels (more on that later). ARR Scale Growth Rate (Annual) Source: 2019 OpenView SaaS Metrics Survey, N=639 0% 25% 50% 75% 100% 125% 150% 175% Less than $1M $1-2.5M $2.5-10M $10-20M $20-50M More than $50M Median Third Quartile 2018 Median

11. 11O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 11Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved Growth Rate (Annual) 50% 75% 100% 140% Younger than 30 30 or older Median Third Quartile GROWTH: IT HELPS TO HAVE A MORE EXPERIENCED FOUNDING TEAM Successful founders have often tried, failed and themselves experienced the pain points they’re solving for customers. For example, Eric Yuan founded Zoom because during his time leading Engineering at WebEx he came to believe “the service simply wasn’t very good” and “someday, someone is going to build something on the cloud, and it’s going to kill me.” Source: 2019 OpenView SaaS Metrics Survey, N=639 Founder age

12. 12O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 12Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved BURN: STARTUPS ARE BURNING MORE TO TRY TO BOOST GROWTH Armed with record amounts of cash, SaaS companies are burning far more than last year. For companies with $10-20M in ARR, median burn is $375k per month (up from $183k) and the highest quartile is now burning $625k per month. Burn rates have increased the most among companies with $20-50M in ARR. Source: 2019 OpenView SaaS Metrics Survey, N=639 ARR Scale Monthly Cash Burn ($000’s) $0 $50 $100 $150 $200 $250 $300 $350 $400 Less than $1M $1-2.5M $2.5-10M $10-20M $20-50M More than $50M 2019 Median 2018 Median

13. 13O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 13Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved SALES AND MARKETING: WATCH OUT FOR INEFFICIENCIES PAST $10M ARR Sales and marketing are a SaaS company’s largest area of spend after they hit $2.5M in ARR (before that, it’s R&D). Sales and marketing spend peaks when companies are scaling through Series C/D. Watch out for inefficiency in spend and a rising CAC payback without corresponding improvements in growth. ARR Scale Sales & Marketing Spend (% of ARR) Source: 2019 OpenView SaaS Metrics Survey, N=639 0% 10% 20% 30% 40% 50% 60% 70% Less than $1M $1-2.5M $2.5-10M $10-20M $20-50M More than $50M Median Third Quartile

14. 14O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 14Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved LOGO RETENTION: FIX YOUR ‘LEAKY BUCKET’ BEFORE POURING IN CASH Top tier companies see logo retention rates of at least 85%. Be careful of accelerating your sales and marketing spend if you have a churn problem! Median retention rates do differ depending on deal size: • <$1k: 71% • $1-5k: 83% • $5k-25k: 90% • $25k-100k: 90% • $100-250k: 93% Source: 2019 OpenView SaaS Metrics Survey, N=639 Logo Retention Rates (Annual) 11% 6% 21% 27% 35% <65% retention 65-74% retention 75-84% retention 85-94% retention >=95% retention

15. 15O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 15Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved NDR: GROW YOUR EXISTING CUSTOMERS FIRST The ability to expand new customers facilitates rapid growth. Top tier companies see >100% net dollar retention. For comparison, median net dollar retention for public companies was 107% (at the time of S-1 filing). Source: 2019 OpenView SaaS Metrics Survey, N=639 85% 82% 86% 94% 96% 108% <30% Growth 30-100% Growth >=100% Growth Avg. Logo Retention Avg. NDR Retention Rates (Annual) Annual Growth Rate

16. 16O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved SAAS METRICS BY COMPANY ARR <$1M $1-2.5M $2.5-10M $10-20M $20-50M >$50M S I Z E A N D G R O W T H Employees 8 (15) 25 (40) 47 (70) 100 (149) 180 (269) 555 (752) Funding $3M ($3M) $3M ($9M) $8M ($15M) $28M ($43M) $63M ($88M) $88M ($100M) YoY Growth Rate 80% (125%) 80% (165%) 50% (100%) 42% (78%) 40% (61%) 29% (40%) F I N A N C I A L Monthly Burn Rate ($ in 000s) $50 ($175) $50 ($175) $175 ($375) $375 ($625) $375 ($1,025) $50 ($1,063) Sales & Marketing Spend 30% (50%) 30% (46%) 35% (50%) 40% (58%) 42% (55%) 38% (48%) R&D Spend 50% (80%) 48% (60%) 30% (41%) 30% (39%) 30% (40%) 20% (30%) S A A S V A L U E D R I V E R S CAC Payback (months) 5 (11) 8 (11) 11 (15) 15 (21) 15 (15) 15 (15) Logo Retention 90% (100%) 90% (98%) 90% (95%) 88% (95%) 89% (95%) 88% (94%) Net Dollar Retention 100% (106%) 100% (113%) 100% (110%) 95% (105%) 102% (110%) 98% (101%) Source: 2019 OpenView SaaS Metrics Survey, N=639. Median (Third Quartile)

18. 18O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 18Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved FOUNDERS ARE MOST WORRIED ABOUT GTM AND PRODUCT EXECUTION We learned that only two things really matter at the end of the day: product execution and GTM execution. These were founders’ top two concerns regardless of company size with just one exception (hiring was the #1 priority for those with $1-2.5M in ARR). 16% 19% 21% 22% 23% 26% 37% 50% 56% C hanging needs Hiring velocity C om petitive pressure Fundraising Skills m ism atch C ash burn Hiring qualityG TM execution Productexecution Source: 2019 OpenView SaaS Metrics Survey, N=639. Founder Concerns

19. 19O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 19Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved WHO YOU TARGET SHOUD INFLUENCE HOW YOU SELL Inside sales is the most popular sales channel in SaaS and is used to reach customers of all sizes, even very small businesses. Make sure sales channels are supported by your average deal size (do you make enough to pay competitive sales commissions?) and how your customers prefer to buy. Target Customer Segment Sales Channel Mix (% of ARR) Source: 2019 OpenView SaaS Metrics Survey, N=639 27% 19% 7% 38% 40% 42% 32% 12% 16% 32% 47% 8% 16% 21% 16% 16% VSB SMB Midmarket Enterprise Self service/freemium Inside sales Field sales Indirect Mixed

20. 20O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 20Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved YOUR TARGET CUSTOMER INFLUENCES PRICING POWER, TOO There’s a strong correlation between target customer size, sales channel and ACV. Take a close look at your ACV and target market and see whether you’re on track to build an enduring business (pro tip: stop selling Enterprise deals for <$25k). Annual Contract Value (ACV)Source: 2019 OpenView SaaS Metrics Survey, N=639 31% 11% 45% 50% 20% 8% 12% 25% 47% 41% 7% 26% 40% VSB SMB Midmarket Enterprise <$1k $1k-10k $10k-50k $50k-250k Other Top Customer Segment

22. 22O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved PRODUCT LED GROWTH IS YOUR SECRET WEAPON Product Led Growth IPOs Since 2012

24. 24O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 24Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved ADOPTION OF PRODUCT LED GROWTH STRATEGIES Most companies are experimenting with PLG and relatively few have gone ‘all in’ (33% of respondents). Free trials remain the most popular product led growth strategy. Freemium – while much discussed – has only been adopted by 18% of companies. Source: 2019 OpenView SaaS Metrics Survey, N=639. PLG Companies All Companies Free trial offering 74% 45% Product analytics for decision making 67% 31% Self-service buying experience 61% 28% Bottoms-up sales 55% 31% Product qualified leads 53% 29% Referral programs 50% 31% Dedicated growth FTEs 47% 27% Freemium offering 38% 18%

25. 25O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 25Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved PRODUCT LED GROWTH CAN BE USED TO SELL INTO THE ENTERPRISE Product led growth is especially prevalent among companies targeting very small business or SMB customers. Still, 1 in 4 companies targeting large enterprises embraces PLG. 48% 42% 36% 25% 52% 58% 64% 75% VSB SMB Midmarket Enterprise PLG Non-PLG Target Segment % of Respondents Source: 2019 OpenView SaaS Metrics Survey, N=639. PLG Companies defined as those leveraging more than three of the 9 PLG strategies surveyed.

26. 26O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 26Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved 0% 20% 40% 60% 80% 100% 120% Less than $1M $1-2.5M $2.5-10M $10-20M $20-50M More than $50M PLG Non-PLG PRODUCT LED BUSINESSES GROW FASTER AT SCALE PLG companies grow slowly in the very early days, as it takes time to build a community of free users and convert those users to paying customers. After $10M in ARR, the magic of PLG kicks in as these companies can scale faster. They aren’t as limited by their ability to hire, onboard and feed leads to enterprise sales reps and they’ve built up significant goodwill from their users. ARR ScaleSource: 2019 OpenView SaaS Metrics Survey, N=639. PLG Companies defined as those leveraging more than three of the 9 PLG strategies surveyed. Median Growth Rate

28. 28O V | 2 0 1 9 E X P A N S I O N S A A S B E N C H M A R K S Proprietary and Confidential ©2019 OpenView Advisors, LLC. All Rights Reserved SAAS METRICS BY COMPANY ARR <$1M $1-2.5M $2.5-10M $10-20M $20-50M >$50M S I Z E A N D G R O W T H Employees 8 (15) 25 (40) 47 (70) 100 (149) 180 (269) 555 (752) Funding $3M ($3M) $3M ($9M) $8M ($15M) $28M ($43M) $63M ($88M) $88M ($100M) YoY Growth Rate 80% (125%) 80% (165%) 50% (100%) 42% (78%) 40% (61%) 29% (40%) F I N A N C I A L Monthly Burn Rate ($ in 000s) $50 ($175) $50 ($175) $175 ($375) $375 ($625) $375 ($1,025) $50 ($1,063) Sales & Marketing Spend 30% (50%) 30% (46%) 35% (50%) 40% (58%) 42% (55%) 38% (48%) R&D Spend 50% (80%) 48% (60%) 30% (41%) 30% (39%) 30% (40%) 20% (30%) S A A S V A L U E D R I V E R S CAC Payback (months) 5 (11) 8 (11) 11 (15) 15 (21) 15 (15) 15 (15) Logo Retention 90% (100%) 90% (98%) 90% (95%) 88% (95%) 89% (95%) 88% (94%) Net Dollar Retention 100% (106%) 100% (113%) 100% (110%) 95% (105%) 102% (110%) 98% (101%) Source: 2019 OpenView SaaS Metrics Survey, N=639. Median (Third Quartile)

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