KeyBanc Capital Markets 2024 SaaS Benchmarks Report

Live from Schenectady, New York, it's SAS Talk with the Metrics Brothers, Growth and CAC.

And I'm Growth, better known as Ray Reich, founder and CEO of Benchmarket.

And I'm CAC, better known as Dave Kellogg, EIR at Balderson Capital, independent consultant, and the author of Kellogg.

And together we are the Metrix Brothers.

And we go together like turkey and stuffing.

Now that is a food pairing I can get behind, Dave, especially at Thanksgiving.

Of course, of course. Are you carving, uh, are you carving the turkey in Southern California at Thanksgiving this year, Ray?

Well, I'm having Thanksgiving dinner at a friend's house in Southern California, and it's a tradition that the host carves a bird. So I simply get to provide color commentary on his carving performance.

Oh, okay. Well, since you're, since you're color on the Thanksgiving carving, uh, you can be lead today on our topic, the KeyBanc Capital Markets, uh, A Fine Tradition, uh, also sponsored by Sapphire Ventures. Uh, this is now their 15th annual, um, SaaS Benchmarks Report, kind of the granddaddy of them all. Uh, the Rose Bowl Parade, I can't remember, that's a New Year's thing, not a Thanksgiving thing. I can't remember, it's New Year's, yeah. Okay. So that's going to be our topic today. We're going to look into this kind of vulnerable SAS metrics report.

Okay, Dave, you know, when I get to write this script, you did, and I put a line in there and we missed it because you were going to gobble up all the information in this report.

Oh, I missed that one, Ray. I must have been, what do they call it, involuntary blindness?

I'm not saying it was funny, but it was my attempt at humor. But let's go ahead and hear a word from our sponsor, Dave.

The Metrics Brothers is proudly sponsored by Benchmarkit, the B2B AI and software industry's largest, broadest, and most contextualized benchmarking index. Dave Kellogg and Ray Grothright have put the Metrics Brothers podcast on hiatus for the remainder of 2026. All episodes we have ever recorded are still available in your favorite podcasting app. You can reach Dave @Kellogg and Ray on LinkedIn @RayReich. Thank you so much for listening to the Metrics Brothers podcast.

Okay, here we go. The KeyBanc Capital Markets and Sapphire Ventures 2024 Benchmark Report. You know, the thing I love about this report, Dave, is it was launched by a good friend of ours, David Spitz, all the way back in 2010. At Pacific Crest. And now Dave's out there doing his own benchmarking at BenchSights.

Yeah, back when he was an investment banker. Quite visionary of him to do that back then.

It was, and it really was the industry standard. I started, I think, reading it in 2010, Dave, and until 2021, 2022, it was my Bible for SaaS benchmarks.

Yeah, me too, for many of us. I think we had some issues after that. It kind of went downhill. So I'm hoping it gets better this year. Last year was kind of grim, but we'll see in this episode what improvements they've made.

Well, I think let's just jump into the first thing, Dave, here, and that was really the demographics of the participants. And one of the things I like that they did, and this is on page 3 of the report, is they showed the respondents by ownership type. And it was 46 of the participants were VC-backed and 37 was PE. So pretty good balance between VC-backed and PE. Independent, maybe that's bootstrapped or lower. But then also on the size, Dave, one of the things I also liked was it was pretty evenly split between under $10 million, $10 to $25 million, $25 to $50 million, $50 to $100 million, and greater than $100 million was only 4. Probably the thing that jumped out at me was there was only 104 total respondents, which is a lot lower than traditionally you see in the KeyBank report.

Yeah, and only 50 of them responded to— looks like ARR segment and ARR growth questions. So the first thing we'd say, I think this was an issue last year I still think it's worth reviewing the survey, but when you cut this thing, be careful because you're talking about, you know, in the $10 to $25 million ARR segment, 14% of 50 companies. So you're talking 7 companies is that entire data set. So we got some small data samples here. Cut with care, but onward, Ray.

Okay, well, jump into page 5 of the report. And what I like that they did here, Dave, was they took on the left-hand side They have the key performance metrics for the median between '22, '23, '24. And then they show on the right-hand side that same chart for the top quartile performers. And I could go through a lot of the data. I'm going to highlight 3 or 4 things. But the thing that really struck me, Dave, was the median across a lot of these metrics were like, Ho hum, baby, it's cold outside that we've talked a lot before. But the top quartile for a lot of the metrics, whether that was growth or CAC payback period or a Rule of 40, all of those were actually pretty good. But it tells me that it's only the top performing companies today that are hitting those benchmarks that I think investors are going to love.

If I was setting benchmarks from my startup, Ray, I would use their top quartile. Some of these surveys, I might use the median like Iconiq, whereas, you know, as we've often said, it's the Ivy League applicants. Here, I like their top quartile, NRR 109, rule of 40, 31, ARR per employee 235. Those are the kind of numbers I would try to aim at. Their median's a little low. Your board will not get excited about their median. Like, let's shoot for an R40 of 15%, the CAC payback of 20 months, kind of long. I did have one thing to add on the slide, Ray, before we move on though, because I know you're moving fast. Which is there's something on the prior slide that just in my mind doesn't foot to this slide, which is you can see the quotas at the 50th percentile are $750K. At the 75th percentile, they're a million. So let's just say quotas $750K to a million, pretty normal in my world. Look at the productivity on the prior slide, $300K. So now one of the things I don't love about this survey, 328, um, is they don't show their definitions clearly. And I think, Ray, I know you're in the survey business. I wish every person who puts surveys out put the actual question they asked It would help me a lot to interpret it. But to me, they're basically— here's my argument. They're saying that quotas are $1 million, let's say, or even $700,000. You're getting 70% attainment on that. So you cannot possibly have an average, a realization of less than $500K. The math just doesn't work. So somewhere there's a definition problem. Something's wrong here. I'd take the attainment data with a grain of salt, and I'm not sure what to do with this productivity versus quota gap because they're saying your average rep does $330K, but the quota is either $750K or $1 million. It's like, you know, yeah. So—

Dave, I got to double-click on that because I do want to get in because there's some interesting parts of this report. But, you know, you look at that on slide 17, they show account executive productivity of that 328. And number one, we got to highlight, these are estimates for 2024. So they did this survey like in September and they got 23 actuals. And the '24 numbers in the report are all estimates, Dave. So that's important to point out, I think.

Yeah, by the way, it doesn't change. The, the other good thing to note is pretty much the answer is we have 7 reps or 6 reps, or roughly we have 7 reps and we do about $330 per year in new ARR per rep. And look, I can think of how this gets broken, Ray. And again, in the survey business, if you're going to ask somebody about a year, starting reps versus ending reps is super important. Especially if they're growing companies. You know, these companies are growing at around 30%, let's just say 20-30%. So assume they're ending the year with 20-30% more reps than they started. So that's going to depress these figures, right? Because a guy might be employed for one day on December 31st and they're going to be counted in headcount, presumably. But I still smell a rat on these numbers. These are too low. I would never try to get $300K per rep unless their quotas were $500K. Um, and they were earning $300,000 divided by 4, $75,000, right? Something's afoul here.

Well, I had to look at this 3 times, Dave. And page 17, if you look at the footnote there where it's at $328,000 of account executive productivity, it says AE productivity equals new logo ARR plus expansion ARR divided by number of quarters. It's like, that's new and expansion, Dave, which shocked me.

Yeah, I was fine with that, frankly, Ray. That doesn't bother me. What shocks me is the $330K. I personally think there— I would have— look, when I do productivity, unless customer success is doing all upsell and expansion, I would actually include— I would do both new logo ARR and expansion ARR. That's fine with me. It's not a massive point to me. The massive point is the incredibly low number.

Yeah, there's another benchmark, and we'll get off this because we spent a whole episode on this. But at $328,000 of new ARR per FTE, if you use the 5-to-1 ratio where the quota is supposed to be—

excuse me.

I just did that, Ray. You weren't paying attention. I did that already, Ray. Remember I said when I divided it by 4, I used 4, not 5, right?

Right.

Unless they're being paid $330,000 or whatever, $300,000 divided by 4 equals $75,000. So that was the point. Sorry to interrupt, but We're agreeing again, happily.

Okay. Well, let's move on. So the next thing I wanted to highlight real quick was growth rates. Now I can just read the numbers and people can be like, who cares?

Right?

But if you look at the growth rates, only the small companies, kind of less than $10 million, actually saw growth rates increase with their '24 estimates versus '23. It goes from 25% to 26% at median.

But it is on slide 8 for those following in their handbooks.

My concern here is if those are the median growth rates and we see that type of AE quota productivity, is this really the same investable business that was 3 or 4 years ago? Because all these numbers are down dramatically over the last 3 to 4 years, which tells me unless you're in that top, top, it's going to be hard to get the next round of investment. That's my takeaway.

Yeah, I think it's a reasonable takeaway, Ray. I've always felt SaaS VC fundraising is a game of have and have-nots. There's people who hit all the numbers and everybody wants to invest in them and it's really easy. And there's people who are kind of average and it's actually very hard. So I think the important part, if you're thinking about fundraising strategy, I mean, basically if you want to go to Ivy League profile, you better have Ivy League test scores. If you want to raise from the top Sand Hill Road VCs, you better be top quartile or better. on these metrics, and average is not going to get you that. Um, so I don't disagree, Ray. Um, I can't remember if they have the top quartile growth rates anywhere handy, but, uh, yeah, these median growth rates are, are not exciting.

Yeah, top— um, the top quartile growth rates are on page 5, and for 2024 estimate, it's 27% is to be in the top quartile.

Yeah, I was kind of thinking 30 was the minimum on exciting. And even then, I mean, in top-tier VC, $100 is a bit of an exciting, right? Uh, but, but, but so, so these things are all relative, but that makes a little more sense to me.

So, so Dave, the next thing I wanted to cover was— it's page 9, and it's really the thing I want to hop out, look at— is new ARR segmented by new logo versus expansion ARR. Now traditionally, you know, and I know you've got your rule of 70/30, 70% of total Growth is from new and 30% is from prime expansion. But except—

Early rule, Ray. Ray, I gotta interrupt you 'cause you brought it up. Let me do my rules. I do me. So I say grosso modo with a very broad brush, if it's a lot above 30, I start to worry if you're relying too much on your base. And if it's a lot below 30, I start to worry if you're ignoring your existing customers. So to me, it's not quite rule of 30 status. Like, 'cause the rule of 40 is quite literal, right? Like 40 actually turns out to be a big breakpoint between, you know, those who are worth, you know, 2x revenue multiple relative to the others. But my thing is not a rule. I don't know what to call it. A rule of thumb of 30. How about that? Back to you.

Well, the thing— then the alarm bells might be going off when you look at page 9, because at $10 to $25 million, they say the split is 52% from new logo and 48% from upsells expansion. And that remains pretty consistent at each company's Um, size stage. So that tells me, boy, are we really that inefficient of getting new customers acquired and their relevant ARR? And how does that carry forward in the future? Because I don't think everybody can have 50% of their revenue coming from expansion, Dave.

Yeah, I mean, look, if you're a boutique vertical with a limited TAM, boutique vertical SaaS, limited TAM, then maybe at $25 million you can go 50/50. But if you're, you know, if you're telling investors you're pursuing a multi-billion dollar TAM, I have no idea why you would have so much unless you had a very specific land and expand business model. I, I personally would not be excited to hear how much, you know, if you're getting 50% from your existing customer base. In my mind, it's too high. So, so I think I agree with you. I would just caveat it by saying it's a little bit of a function of who you are and what you do. But, but if you're off screaming multi-billion dollar TAM, $20 million is not a big company.

No, it's not. I, I need some help and insight from you because I I struggled with this next slide we're going to talk about. That's page 11, and it's the ARR retention metrics. So you look at the median net retention, right? It was 102% in '22, 102% last year, 101%. So Dave, help me understand this. At 101% median net retention, but we're seeing expansion being almost 50% of total new ARR. That would tell me that net retention would have to be higher unless gross retention was very low, which it's not. So these numbers just— I can't make sense of them.

Or maybe there's just not very much new ARR, um, which is a little bit consistent with the 20% growth rate. Um, so, so yeah, yeah, I think that that's probably the answer to the riddle, although you may be on to something there. Uh, I don't typically analyze that. You do that a lot, Ray, and I don't. This is not a way I think about it because I think of them as just 2 independent things. There's this bucket of ARR and I want to know how much it's growing or shrinking. And then there's how much new stuff we're selling. And what have you just done there? You're comparing bucket, you're taking the expansion part of the bucket and then comparing it to what gets poured into the bucket from the outside.

I don't know.

There's nothing wrong with the analysis. So, but since you brought it up, I think you're going to have to be the expert in that technique. My take on this is, I often joke that 110 is the new 120, that, you know, a year or two ago, if we were, we'd be saying, hey, NRR of 120+ will impress people. I think today we'd say NRR of 110+ would impress people. Their gross retention is actually quite high, Ray, in my opinion. They're showing 91% at gross retention, and I would've guessed closer to 80% to 85%. So I'm not sure what's going on there, if you have a take.

Yeah, I've been seeing it kind of edging up over the last 2 years 'cause we've focused so many customer success resources on it. I see it around 88 to 89% now. Now, of course, it's heavily correlated to ACV. If you're a $50K product, I can see that 89 to 90. But if you're at $10K, I see it down in the 83 to 84, but it's higher than it was 2 years ago, Dave. Now, the next slide, slide 15. I thought you might like this one because it's talking about a little bit about marketing and indirect sales strategies. And here's what jumped out at me. And it showed a shift in priorities on the far right-hand side of page 15. And it said, for systems integrators, 52% of the respondents said it was increasing as a priority. Marketplaces, 50% said were increasing as a priority. And tech partnerships. Now, it doesn't define tech partnerships. I don't know if that's other technology companies or SI and consultants. But 44% say it's a higher priority. This is telling me that the direct model is being challenged. So they're looking for indirect and referral type sources, working with SIs and marketplaces. And my question is, is that going to be a bigger and bigger trend we see over the next 3 to 5 years? And it sounds like it might be.

It might be, Ray. Look, I have a different set of issues with this slide. First, I'm going to say you got to learn how to color code. Because red means no change on this slide. When you look at it, you see increasing, decreasing, steady, and somehow decreasing is orange and steady is red. So when you skim this thing the first time, I find it highly confusing. First point. But you got through that in your analysis, so good for you. Look, the quote to me is a tell. I mean, first, second, Ray, they should list the questions so we know what they're asking. So we don't know, so we have to guess. If this quote is a tell, it says technology partnerships and loose affiliations without resale or referral mechanisms continue to increase. Okay, so it's not an indirect sales strategy if you're not reselling. So I have a semantic problem with the question, right? Like, co-selling with a technology partner is not indirect, it's direct, right? My definition of direct versus indirect is who takes the paper, and if you're not taking the paper, it's not indirect. So to me, between the color coding, which I can't understand, and the question not being listed, and a quote in the second part of the quote, just to pick a little fun, is, uh, as SaaS startups start to position themselves as part of the opinionated modern stack. I have no idea what an opinionated modern stack is. Uh, so I don't know, Ray. I, I don't make much of it because I can't understand it. And I don't know, I don't— the companies I work with, we're cautiously investing in partnerships, right? Because they're kind of They can be very high investment and they can be, you know, they can be great return if they hit, but often not.

A lot on that slide. There's a lot on slide 16 too. And slide 16 is the go-to-market organization breakdown. Dave, I got to ask you about this because, and I'm conflicted because I'm doing a B2B marketing benchmark survey right now. And the first thing on this chart, it says sales and marketing spend breakdown. Sales, 54%. Marketing, 46%. Now, I've been reading these reports for, you know, 15 years, and it was always closer to 70% on sales and 30% on marketing. If the ACV was lower, it was a little more on marketing. Maybe it went up to 60/40, but I've never seen this. I just, I couldn't get over the breakdown here. What say you?

Yeah, my rule of thumb is 2 to 1, which would be 66/33. And again, just, just so people don't get dogmatic about my rules of thumb, right? It's just a rule of thumb. So, so it varies a lot as a function of the business model. But yeah, I'd say this is suspect. The other thing, if you want to say what's suspect, there's 104 people who took this survey, only 53 answered this question. And that's interesting itself. Maybe they don't know, which would be weird, uh, or maybe they didn't understand the question so they didn't answer it. Um, I don't know. But yeah, I'd say that number is suspect. I still think there's some good stuff on this slide. Particularly the ratios. Again, they're all off small data points. Total respondents to the question, 63. But those ratios, so, you know, an SMB AE to BDR, 2 to 1, mid-market 3.5 to 1, enterprise 1.8 to 1. So a little surprising you give SMB so much support. I would have expected potentially even a lower number there. But to see more in mid-market than enterprise makes sense. AE to SE in mid-market, 2.9. Okay, so 3 SE, basically 3 AE share at SE, at enterprise 2 do. Makes sense to me. Um, the other thing was super interesting to me was book of business. $1 million in ARR per CSM in SMB, $1.4 million in mid-market, and $2.5 million in enterprise. I find these numbers low, but then again, they are medians. I recommend to my customers $3 to $4 million. Uh, they also do it on an account basis, on an account-based basis as well. So I thought that stuff was valuable.

I, I think it's valuable, but some of the numbers jumped out at me. Like right now with the clients I'm working at on Kind of planning for 2025. If you're less than a $10K product, I'm questioning even a 4-to-1 ratio for AEs to BDRs. And even—

You don't have any BDRs, right, Ray? At 5, there's a point below which you don't need BDRs, right? You just have reps.

I'm a big fan of the, of the full lifecycle rep for anything under $10,000.

Yeah. Yeah. So I hear you there. So that really, basically, I'm a little dubious about the SMB column. The mid-market and enterprise columns, however, make Yeah.

Okay. I know, I, you know, whenever we do these reports, I'm always too optimistic. I put too many slides in the script, but here's a couple more I just wanted to jump out at. And I'm going to skip the median ARR.

Go, Ray. Just go wherever you want to go.

Human capital efficiency, which is slide 27, and it's the median ARR per FTE. Now on slide 27, it says 154 in 2023. Going up to an estimate of 173. But from all the other benchmarks I've seen, Dave, that tells me this skews towards less than $20 million companies because I'm seeing $50 million getting closer to 250 to 300. So it just tells me that this is a lot of smaller companies in this particular slide.

Yeah, I mean, I'll just— I'll take a totally different angle on this, Ray. If you're gonna present a slide in a report that has zero incremental information beyond what you had in the report summary, don't present it. There's, there's a row on slide 5 that is that entire chart, right? ARR per employee, 133, 154, 133. That's— and that chart actually, that chart has less information than this slide because slide 5 also includes the top quartile. So just in my mind, presentation silliness. We already talked about it. I think the, the top quartile numbers were things I would, I might argue to my board are decent. I would never try to defend $173K in ARR per employee as the best, you know, best-in-class metric to my board.

Right, great.

I totally agree.

Okay, my favorite page in this report was page 32, and it showed pre-money valuations. And on the right-hand side of page 32, it showed it by growth rate. Now, this is common sense, everyone talks about it, but I love seeing the empirical evidence. And basically what it says is if you're a low-growth company, the median multiple is 5.1. If you're growing between 20% and 50%, which is a pretty broad range, it's 10x. And if you're growing 50%, the median is 14.3x with a 75th percentile to get to that top quartile, 27.2. So I love this chart and it reinforces my belief that growth, Ray Growth Reich, trumps profitability. Anything jump out at you about this chart beyond what I just said?

Uh, I don't think so, Ray. I mean, it was a good summary. Um, I mean, I think the short answer is the, the, you know, the jury is back. And, you know, on margin, a point of growth is worth 2.3 times what a point of profit is. And it all makes sense because growth compounds and profit doesn't. So, so, you know, when I work with companies, if we're shooting for Rule of 40, I'm always saying let's be 30/10, not 20/20. And that would be consistent with what you're saying. Well, that wouldn't get me out of mid-growth there, but yeah, I won't do the math. But what you're saying is if you're on a boundary point, you're better off tipping your R40 to be 60, -20 as opposed to 40, 10.

60, -20.

40, 0.

Right.

That would be better, right? See, and I agree with you.

Yeah, and I, I've been doing a lot of analysis of public data recently, and the sweet spot is 30% and above growth and 10 to 20% free cash flow margin. But that's companies that are in the $500 million and above range. But that's the blend that's really getting the highest multiples today, Dave.

Yeah, they kind of show that. I actually quite like slide 34 they do, which is kind of a color-coded Rule of 40. Um, and, uh, they basically show the median multiple, EV to next 12-month revenue multiple, by our 40 score. Uh, and they're saying that the median multiple if you're 0 to 20 is 2.6x, if you're 20 to 30 is 3.6, then boom, your inflection point between 30 to 40, it's 5.2. So nice, it'll jump up to a, you know, a decent multiple. And if you're above 40, it's 7.7.

You know, I must admit I didn't spend a lot of time on that chart, but that is chart number 34. It's a good one.

You're right. Okay. Okay.

Well, that is our breakdown of the 2024 KeyBanc Capital Markets and Sapphire Ventures Benchmark Report. I'd still recommend everyone to go look at it, but just think about the population sizes.

Yep. The last thing, Ray, in 30 seconds is just bear in mind any report like this that talks about valuation at last transaction, you have to be careful because we could be looking at 2021 or 2022 Multiples. They're kind of like light from a distant star, um, because people aren't raising money now, right? They're, they're making use of the money they have. So I, I still believe for the next year or two, anybody who does valuation analysis as of last transaction is, is going to be looking back into ZIRP-era multiples. So be careful how you interpret.

That's a really good point. And when we did the iconic report, we found that they went all the way back to 2012. So Great insight, Dave. Thank you so much for doing this breakdown with me.

Thanks, Ray. The Metrics Brothers AI, SaaS, and More is a production of the Metrics Brothers Growth and CAC and a member of the Bench Market Podcast Network. By accessing this podcast, you acknowledge that the Metrics Brothers make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided or the humor content of the jokes told. Ray, information, opinions, and recommendations presented are, according to our spouses, probably wrong. and provided for information purposes only. This podcast should not be considered professional or, for that matter, unprofessional advice. We disclaim any and all liability for any direct, indirect, indirect, misdirect, incidental, special, ordinary, consequential, inconsequential, or other damages arising out of any use of, or God help you, reliance upon the information presented here. Ray Grothreich is based in New York City and available on X @RayReich. Dave Kellogg is based in Silicon Valley and available on X @DaveKellogg. Kellogg. Schedectity, which is French for unspellable, is not our actual production location. Thanks for listening.