2024 SaaS Benchmarks Report by High Alpha
Introduction
Welcome to the 2024 SaaS Benchmarks Report. Originally produced by OpenView Venture Partners, the SaaS Benchmarks Report has been the definitive resource for SaaS founders looking to benchmark their companies' performance against peers. The collection and analysis of key metrics has resulted in a best-in-class collection of data and insights that helps founders navigate the complex and ever-evolving SaaS landscape. To produce the report, we poured through tens of thousands of data points, industry trends, and qualitative feedback, including a new section measuring founder wellness. This year’s report is powered by survey responses from over 800 unique SaaS companies, resulting in the most comprehensive Benchmarks Report to date.
At High Alpha, our mission is to help founders and the companies they lead reach their full potential. We believe that stewarding the SaaS Benchmarks Report is a natural extension of this mission. Alongside our partners at OpenView, Paddle, and Tremont, we're excited to bring new energy and insights to this essential resource. We aim to build on the existing foundation, while incorporating new data points, analytics, and fresh perspectives to ensure that the report remains the definitive guide for SaaS founders for years to come.
As a reminder, this website provides a high-level overview of the SaaS Benchmarks Report data. For a deeper dive into the data and key findings, download the full report.
800+Survey RespondentsThe majority of respondents came from the US (62%) and Europe (20%)
47% Respondents Identified as CEOs and Co-FoundersOther respondents included Head of Finance (20%), Head of Operations (6%), and Other (27%)
37%Respondents Targeting the EnterpriseOther respondents had primary ideal customer profiles (ICP) of mid-market (31%), SMB (22%), micro-business (7%) and consumer (3%)
31%Respondents with $1-5M in ARROther respondents reported ARR of less than $1M (26%), $5-20M (26%), $20-50M (10%), and greater than $50M (7%)
Thank you to our 2024 partners who made this report possible.
- Presenting Partner
- Supporting Partners
- Venture & Platform Partners
The Bottom Line, Up Front
The Rise of Generation AI
The Generative AI supercycle is impacting SaaS companies in both predictable and unexpected ways, and will continue to do so in the years to come.
Market Stabilization
We’re finally seeing growth and retention begin to stabilize after two years of declines. U.S. and global VC investment is also showing signs of stabilization.
Growth & Efficiency
Companies that are succeeding in the Generation AI era are finding ways to achieve both growth and efficiency, and seeing resulting gains in employee productivity.
AI-Fueled Growth
Nearly 70% of SaaS companies that offer an AI component are testing or monetizing AI products. Additionally, AI-native and vertical SaaS is outperforming horizontal SaaS.
Founder Sentiment
Two-thirds of founders indicate they are experiencing moderate to extreme stress, but 92% remain optimistic about their company's future.
Introducing Generation AI
The public release of ChatGPT in November 2022 signaled the birth of a new technology innovation supercycle. We call SaaS companies building in the midst of this transformation, Generation AI.
Last year’s SaaS Benchmarks report hinted at companies building differently, as founders scrambled to incorporate AI into their products and services. This year’s data shows AI-native companies growing more efficiently than past early stage companies. Additionally, they're ushering in a new generation of software and business models that shift the value proposition from helping you get work done to getting work done for you.
Every SaaS company is now, in part, becoming an AI company.
Market stabilization is evident in public SaaS data, venture capital trends, and survey results. Public SaaS companies reported steady net dollar retention at 110% for three quarters after declines from 2022 highs, with revenue growth stabilizing at 17%-18%. Venture capital is fueling recovery, with nearly a third of 2024 investments going to AI-native companies, and deal activity rising for three consecutive quarters as of Q2 2024, per NVCA and Pitchbook data.
Survey results reflect this recovery, particularly for AI-native companies. Startups under $1M ARR rebounded from 90% to 100% median growth compared to last year's survey. While larger companies in the survey saw continued declines in their year-over-year growth rates, companies with top quartile net dollar retention showed improvement over 2023.
The 2024 SaaS Benchmarks report is packed with insights — let’s dive in.
Market Stabilization
After two years of declining growth and retention rates, public SaaS companies (an important bellwether for private SaaS companies) have shown stabilization. Survey data reveals that year-over-year growth rates have steadied or even increased across certain ARR bands, signaling that the market may be entering a phase of stability and modest expansion.
Additionally, venture capital investment has started to rebound. Over the past twelve months, 47% of companies have raised capital, compared with 37% in the prior twelve months. If this trend continues, capital will be more readily available, customer budgets may continue to stabilize, and the window for growth will likely re-open.
While overall company growth rates have slowed, declines have plateaued or reversed in some cases.
Company net and gross retention rates have stabilized.
- Median Growth and Net Revenue RetentionPublic SaaS Growth and NRR Are Still Down, but Steadying
Source: MeritechWhy It MattersNRR and growth rate declines have leveled off, which is encouraging. While both are well below their 2021 peak, more predictable and steady metrics allow businesses to plan with more clarity.
Private company trends frequently follow public company activity. Since public company data is available quarterly, it’s important to pay attention to what’s happening in public markets to provide insights into what may happen with private companies.
- Median Gross Revenue RetentionGRR Shows Rebounds in Most ARR Bands
Source: 2024 SaaS Benchmarks Report by High AlphaWhy It MattersImprovement in GRR could signal that SaaS spend has rebounded after a significant decrease in 2023. GRR is an important component of NRR, a metric highly-correlated with healthy growth in SaaS businesses.
- SaaS FundingThe Funding Environment Is Improving
Source: 2024 SaaS Benchmarks Report by High AlphaWhy It Matters47% of companies have raised funding in the last 12 months vs. 37% in the prior year. A stable funding environment gives entrepreneurs the confidence to more aggressively invest in projects that achieve key milestones and unlock future funding. A healthy funding environment is critical for startups to grow and compete in their markets.
- Meritech NRRNRR
- SaaS Benchmarks GRRGRR
- SaaS FundingFunding
Growth & Efficiency in Generation AI
Over the last two years, companies have often been faced with making a trade-off between growth efficiency. However, the best Generation AI companies particularly companies "born" in Generation AIare managing to achieve both growth efficiency.
Compared to the previous year, employee headcount dropped 25%-41% for median and upper quartile companies with less than $5M in ARR. At the same time, these companies are more likely to have been founded during the widespread adoption of generative AI. They were "born" in Generation AI.
This stands in contrast when compared to the number of employees at companies with greater than $5M ARR, which have all increased headcount since last year’s survey. The result: improved ARR per FTE for companies with less than $5M in ARR, but decreased ARR per FTE for companies generating more than $5M ARR.
We also explored the relationship between company culture, whether primarily office-based or remote, and growth rates. Interestingly, companies operating primarily in the office tend to experience higher median growth rates (50%) compared to those with a remote culture (39%). However, the median Rule of 40 for both groups is nearly identical, suggesting overall efficiency remains similar.
Why do growth and efficiency metrics matter? Companies positioned to win in Generation AI need to embrace tools that will improve the efficiency of their internal operations.
Companies with less than $5M ARR have increased efficiency more than companies with more than $5M ARR, showing that they're figuring out how to do more with less. Increased efficiency in earlier-stage businesses could better position them to garner future investment or reach break-even more quickly than their predecessors, thereby controlling their own destiny.
Additionally, early stage companies may be taking a more cautious approach to scaling their team as a result of the recent funding and macroeconomic environment.
Companies working together in-person showed higher growth rates, whereas the Rule of 40 for each was nearly identical. The market tends to value growth more than efficiency, although efficiency has become more important in recent years. We speculate that lower real estate costs contribute, in part, to the increased efficiency for remote teams.
Successful companies can be built both in-person and remote — the key is implementing strategies and creating a vibrant culture based on your individual company’s culture.
What's the Same in Generation AI?
Generation AI is disrupting SaaS companies in certain areas, while other best practices, go-to-market playbooks, pricing strategy, and more haven’t shifted…yet.
Subscription Pricing Dominates
68% of AI Products Still Include a Subscription Component
Subscription pricing is still the most favored approach to monetizing SaaS, but many companies are experimenting with alternatives such as hybrid, usage-based, and output driven pricing. The reality is that as buyer expectations shift from “help me get work done” to “do the work for me”, new pricing models that focus less on workflows and more on capturing the value of outcomes will become more prevalent.
AI Monetization strategyMonetization Strategies Remain Rooted In Subscription Model — For Now
Source: MeritechBDR Investment Remains Strong
81% of Companies Kept or Increased BDR Investments, Especially in the Scaling Stage from $1M to $20M ARR
In spite of increased capital efficiency across many of the cohorts we analyzed, SaaS companies are continuing to invest in the business development representative (BDR) function, and in many cases increasing their sales and business development headcount. Frankly, we were surprised to see this trend, as we assumed that investment was likely flowing into alternative GTM tactics.
Year-Over-Year BDR InvestmentsInvestment in BDRs Remains Go-To Lever in Most GTM Motions
Source: 2024 SaaS Benchmarks Report by High AlphaMost Founders Are Optimistic Amid Changing Landscape
63% of Founders Are Optimistic About Their Companies' Future
Founder optimism for their companies, in contrast to the markets the operate in, can likely be attributed the fact that they believe they can exert more control over their company’s individual performance; whereas founders have little control over the macroeconomic environment or vagaries of the particular industries they operate in.
Founder OptimismFounders Are Generally More Optimistic About Their Companies Than the Markets They Operate In
Source: 2024 SaaS Benchmarks Report by High AlphaFounders Worried About GTM
76% of Respondents Report Go-to-Market as Top Concern
GTM continues to weigh on founders, and has increased as a concern every year since 2021. Cash burn concerns have decreased, moving from 32% in 2023 to 28% in 2024. Some interesting patterns also emerged when breaking data down by ARR band — earlier-stage founders are more worried about burn rate while later-stage founders are more concerned with hiring the best talent.
What Keeps Founders Up at NightGTM the Biggest Worry for Founders by a Landslide
Source: 2024 SaaS Benchmarks Report by High Alpha
What's Different in Generation AI?
Over a short few years, we’re already seeing Generation AI’s impact on costs, monetization strategy, and outsized growth rates among AI and vertical SaaS companies compared to horizontal SaaS.
39% of Respondents Reported Rising Costs Associated With Implementing an AI Strategy
Costs and pricing models for AI products are early and still evolving – it will be interesting to observe over time how increased costs associated with including AI features in products will impact gross margins. Founders should keep an eye on these costs to ensure they don’t decrease gross margins too significantly and consider updated pricing to offset cost increases. Of course, the value delivered by the solution will ultimately determine whether customers are willing to pay increased prices for a product.
Nearly 70% Who Have Built AI Products Are Monetizing or Testing Monetization
In 2023, this figure was 63% so companies increasingly see opportunities to monetize AI, potentially driving increases in net revenue retention which is correlated with revenue growth. As noted above, nearly 70% of respondents with AI products are monetizing through subscription or hybrid pricing models that include a subscription component. Today, less than 10% are result or output driven – we see this potentially increasing over time as companies are able to demonstrate more direct impacts of AI on customer results, creating better alignment between software vendors and customers around outcomes.
AI-Native and Vertical SaaS Companies Are Growing Nearly 2x Faster Than Horizontal SaaS
Horizontal SaaS performance remained strong for companies less than $1M ARR, but was significantly outperformed by vertical SaaS and AI companies in revenue bands greater than $1M ARR and in aggregate.
Final Thoughts
While challenges persist, there are clear pockets of resilience within the SaaS industry. Companies that embrace their position in Generation AI are leaning into the enabling technology and ushering in a new generation of products and business models. Furthermore, deploying strategies that seek to balance efficiency and expansion within the existing customer base are proving to be key factors for growth. We are entering a golden age of AI-enabled SaaS companies that will likely re-invent the way software is built, sold, and delivered for years to come.
Benchmarks Team
Kristian AndersenCo-Founder & Partner, High Alpha
Scott DorseyCo-Founder and Managing Partner, High Alpha
Blake KoriathPartner and CFO, High Alpha
Jon HubarttVP, Design & Product, High Alpha
Mollie KuramotoDirector of Marketing, High Alpha
Claire KelleyDesign Lead, High Alpha
Emma RyanMarketing Associate, High Alpha
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