Q3 earnings season for cloud businesses is now behind us. The 63 companies that I’ll discuss here (which is not an exhaustive list, but is still comprehensive) all reported quarterly earnings sometime between October 25th – December 7th. In this post, I’ll take a data-driven approach in evaluating the overall group’s performance, and highlight individual standouts along the way. As a venture capitalist, I naturally cater my analysis through the lens of a private investor. Over my years as a VC, I’ve had the opportunity to meet with hundreds of entrepreneurs who are all building special companies. Through these interactions, I’ve built up mental benchmarks for metrics on which I place extra emphasis. My hope is that this analysis can provide startup entrepreneurs with a framework for how to manage their businesses around SaaS metrics (e.g., net retention and CAC payback).
Appreciate the analysis, this is great way to view results. I have 2 questions on the GM CAC Payback calc:
1) The formula presented appears to apply the margin % to S&M expense, is this correct and if so why would the margin % not be applied to the revenue (ARR change) only?
2) Could you expand on your approach to calculating the ARR when subscription revenue is not explicitly provided in the financials? I've tried re-creating the calc for a few of these and am coming up with varied results.
As always an extraordinary read. Your work, process and reasoning IMO are second to none.
Thank You for your incredible commitment to the truth and accuracy as well as the explanatory narrative on why these metrics are so important.
My strongest recommendation with humble gratitude for what YOU publish!
Appreciate the analysis, this is great way to view results. I have 2 questions on the GM CAC Payback calc:
1) The formula presented appears to apply the margin % to S&M expense, is this correct and if so why would the margin % not be applied to the revenue (ARR change) only?
2) Could you expand on your approach to calculating the ARR when subscription revenue is not explicitly provided in the financials? I've tried re-creating the calc for a few of these and am coming up with varied results.
Thanks!
This was the best concise writing of how to measure company financials with just a few metrics.