OpenView Partners 2023 SaaS Benchmark Report Analysis

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

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

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

And together we are the Metrics Brothers.

And quite a pair at that. What's on tap for today, sir Ray?

Well, I know we got together in New York last week, but not Schenectady to share a nice French dinner. So I wanted to number one thank you for that. That was wonderful.

Yeah, thanks for coming out. Few hundred miles short of Schenectady, I think. But but the wherever we were Upper East Side will do.

Yeah, and and next time I will get you to Kelly O'Byrnes. Irish pub just in case we need them as a sponsor, Dave.

Okay, I'm glad to hear they're still in the pipeline.

They are. So, hey, but I thought, you know, there's been so many great reports coming out recently, benchmark reports, and we've gotten great feedback on kind of our breakdown of previous reports. So what about we take on the just published OpenView 2023 benchmark report today?

I think it's a great idea, Ray. But before we do that, should we get a word from our sponsor?

Well, let's go ahead and do that. 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 Groth Wright have put the Metrics Brothers podcast on hiatus for the remainder of 2026. All episodes we have ever recorded are still available on 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. That— but now that we've heard the word from our sponsor, Dave, let's go ahead and dive into the report analysis. So why don't we just start with your kind of overall kind of feedback after you read the report?

Sure. So first, this is to me one of the seminal benchmark reports that gets put out in SaaS. This year it's 52 pages. It's by OpenView Partners. And the title of the report is 2023 SaaS Benchmarks Report. So look, I think it's a good quant study. They don't actually say what N is, but we've heard rumors it's somewhere between 500 and 700 this year. If you look at the data, you don't see anything that indicates N is too small, because you'll see anomalies when you look at size segments sometimes, or numbers that are too round. You don't see any of that. So I think it's a good quantitative study off a big enough sample. to support the cutting. I like the fact that they do it annually. That gives you the ability to do some year-over-year comparisons. I think it's great for smaller organizations. You know, Ray, I rely a lot on Maritech Public Comps. But those are all $2 to $5 billion ARR companies. And this is a much smaller company segment, right? Their size segments are less than $1 million, $1 to $5 million, $5 to $20 million, $20 to $50 million, and $50+ million. So, if you're in that $50 to $100+ range, you may— this survey may start to lose relevance for you. If you're one of the very, very many SaaS companies that are between 0 and 50, it's certainly highly relevant. For example, certain metrics like revenue per employee or revenue by revenue per employee cut by ARR, that changes a lot as you go through those size segments, right? So some metrics don't, like CAC payback period's a little bit more invariant. Some do. So this is not big publics like Maritech. It's not high flyers like Iconiq. We talked about them in the past, but that's, You know, that's a great benchmark. I always call it the Ivy League applicant benchmark, right? You're comparing against a pretty elite set of companies. This is more of a general look at private SaaS. I'm guessing it's more like your stuff, right, at Benchmarket? And it asks good, good fun questions in addition to, you know, the financial ones. So it's not purely financial. Like it asks what keeps you up at night, which is fun. And it's got some new and interesting metrics like women in leadership and minorities in leadership. So, so that's what I like about it, Ray. Um, any thoughts from you?

Yeah, overall I've always been a big fan of the OpenView, um, research, whether it was their product like Growth Research and, um, recently the benchmark. So pretty good. You mentioned something I think is really important. You know me, I— because I do benchmarks all day long, sometimes I get caught into the minutia. But you mentioned something really important, and that is the size distribution. So 81% Of— and by the way, this is on page 7 of the report— 81% of their participants were less than $20 million, and specifically 54% were less than $5 million. So I think what I saw in those cohorts— I mean, those segments, Dave— really, really good. What are the other things I'd love to see is I'd love to see this segmented product-led growth versus sales-led growth. But they really doubled down on segmenting by ARR, which I think is a great initial view for anyone.

Yeah, I think we talked earlier about OpenView doing a lot of good work on PLG, and that may actually over-bias PLG companies in their segment. I know we're a little worried about that, but so it would be fun to see it cut by sales motion. But right now the primary cut is by size, which works pretty well.

Yeah.

And one of the things I really love that they've done on page 13 and 14, They do a table structure. So you can see all the top metrics that they're benchmarking and you can see it by segment and then by metric. And then on the next page, page 14, they show the year-over-year changes. So from their '22 report versus '23 report, anything jump out at you on those tables, Dave?

Yeah. So first, I do like this format. It's kind of box plotty. If you look at slide 13, it's just using numbers. They show the median and then they show the 25th, the 75th percentile. So it's a nice kind of compact, elegant way to present the information. The other thing I would note as a prefacing remark that their spend ratios are a percent of ending ARR, not revenue, which is unusual. When you say like R&D spend or sales and marketing spend, most benchmarks for me, that's percent of revenue. These guys are doing it as a percent of ending ARR. So be careful if you're comparing these results to benchmarks that do it by revenue. Now, to jump into your question, Ray, yeah, I mean, clearly, baby, it's cold outside. You know, growth is down 26 percentage points to 35%. I'm just looking at the $5 to $20 million bucket. So I'm just going to call out some numbers there. But growth is down. Burn is down from $400K per month to $175K per month. So more than a 50% reduction in burn. GDR is down 5 percentage points to 85. NRR is down 6 percentage points to 102. I always remember the last time I looked at your numbers, you had 104 as the median on NRR. So, this is quite consistent with what I've seen from benchmarket in the past. Most of the hit to NRR came from GRR, which is interesting. So, it kind of suggests that expansion is not the problem. And then, women in leadership is down 8 percentage points to 20%. And that's defined as director and up, not VP and up. But if you really wanted to do kind of a tougher bar, you would do it for the VP level up, not director.

Yeah, there's—

that's a lot of great data. You know, boy, on that page 14, you know, there is so many good insights. Something that jumped out at me, Dave, was I'm glad I'm not running a $5 million to $20 million ARR company because some interesting things jumped out at me. First was the R&D spend. You know, it went from 39% R&D spend as a percentage of revenue last year And that went down to 29%. So a 10% decrease and the gross margin went down 5%. So the thing that jumped out at me was, wow, is that, you know, I used to call that the valley of death, that once you start scaling towards $20 million, sometimes it becomes harder to scale efficiently. So that's just something that really jumped out at me was those 2 things.

Yeah, I hear you. I hear you. I mean, look, it's been tough across the board. I mean, look, if you want to compare hardship, go look at the $20 to $50 million and $50 million plus cuts in burn rate. In $20 to $50 million, the burn rate went from $1.4 million a month to $100K. In $50 million plus, it went from $1.6 million a month to $200K, roughly $175K. So it's tough out there. Yeah, you're right. R&D got whacked in the $5 to $20 million spend. I'm not sure. Look, to me, that looks like a function of growth. Because if you look at the median numbers for the— by segment, it goes 40, 40, 29, 30, 24. So I believe the 29 in there. And I just think in some ways companies are kind of forced to grow up earlier as a result of the cuts, i.e., hey, let's converge to typically bigger company percent of sales on R&D faster.

Yeah, that makes total sense. And, you know, if you go to— I think it's page 18— it talks about, you know, what the growth rate trends have been over the last 3 years. They do a really nice job of '21 versus '22 versus '23. And as you said, that $5 to $20 million AR cohort went from 61% at median last year to 35%. But in the $20 to $50 million segment, they went from 40% at median last year down to 24%. So the pain was definitely all across the board, but really in the $5 to $20, then again $20 to $50 as measured by growth rate, Dave.

Yeah, I agree. But on this chart, slide 18, it's $5 to $50 basically if you combine the 2 segments. They got hit the hardest. Outside of that, it looks like growth is down 5 to 7 percentage points. Okay, 10 percentage points in sub-$1 million. But the place where you're clearly in double-digit growth reductions is the $5 to $20 and the $20 to $50. So people got hammered. You know, if it felt tough in 2023, it's because it was.

Yeah.

Now, I'm not here to talk about any other reports today because we want to stay focused on OpenView. But I did find it interesting on page 20, Because OpenView did this in partnership with Paddle, and Paddle, very global audience. They provide both a price and tax automation platform around the world. They show growth rates are even harder yet from their customer population. Once again, not to confuse things, it's different than this benchmarking population, but it's more in line with what the Maxio Growth Institute is saying, down to like 10%, 8.4% year-over-year growth as measured in Q3 '23. So I actually think, Dave, maybe these growth rates weren't hit as hard as some other populations were.

Quite possible. But, uh, good segue to slide 21, which is, hey, what keeps founders awake at night? Short answer, growth. Well, not quite growth, but more go-to-market execution, uh, which I want to say is highly related to growth. So 73%, the top answer, was number 1, GTM execution. Number 2, product execution, something of a surprise to me. And 3, burning too much cash, which definitely should make the top 3 list. Thoughts from you, Ray, on these, uh, founder priorities?

Yeah, you know, the go-to-market execution, I think everybody, based upon the changing buying process and looking at vendor consolidation, SaaS platform consolidation, it's hard out there as a marketing and sales organization. That didn't surprise me. The product execution, Dave, boy, I would love to see this data segmented by PLG companies versus SLG companies. Because I'm wondering, is this more a reflection of a PLG centricity of participants versus SLG? Once again, I don't know, but I'd love to see that. And then the last thing that kind of jumped out at me, and I think, you know, they probably just asked these questions. A couple of things I would also love to understand is, you You know, are they concerned about the external market conditions? What's going on with SaaS spend management programs and vendor consolidation? Because to me, as a person who's running both a services and a SaaS company, I get really concerned about what's going on out there with my buyer dynamics. And maybe that's just GTM execution is one side of the what's happening to the buyer side. So, Dave, One of the things that would be really interesting is on the product execution being number 2, and you mentioned that was pretty high, that is that different for a PLG company versus an SLG company? Do you think that's an important thing to understand or it doesn't really matter? Everybody needs to have a better product, higher quality.

I don't know, Ray. I mean, it certainly would be fun to see the cut. It's always fun to see the cut. And as we mentioned previously, we can assume there's a lot of kind of PLG companies in any group that's kind of following OpenView. To me, the other argument is just if you look at, you know, percent of sales, product is right after sales and marketing. So it's the second biggest expense. So let's go worry about how that money is being spent. So I can't tell if this is just literally tracking kind of the P&L in terms of where does the money go, sales and marketing being number one, R&D being number two, right? So therefore you see that reflected in the founder worries, or if in fact this is getting amplified because we've got a lot of PLG companies in there and they care more, if you will, about product execution.

Yeah.

And then we should move on because, you know, we try to hold ourselves here to the 20 minutes. But AI strategy, and OpenView called this out, that only 11% of companies saying that's keeping the founders up at night. I was surprised it was only 11%. I thought with— I think I read a report from Boston Consulting Group, like 54% of B2B cloud companies think AI strategy is going to be critical over the next 2 to 3 years. But it just seemed low to me.

Yeah, I mean, one possible interpretation is it is critical, which I think it is, and they're not that worried about it. Like maybe they feel like they're on top of it. That would be my interpretation. I don't read this as them saying it's not important. I'll take the question literally, what keeps you up at night? So apparently other things are higher on the list. So net-net, maybe they feel good about it.

Yeah.

Most of the companies I work with do, to be honest. They have a pretty clear vision of what they wanna do with AI How it'll improve their product.

Gotcha. Well, let's, let's pivot to a topic we've talked about a couple times. Um, once was we talked a little bit about the last, latest episode about MarTech and the Rule of 40. But Rule of 40 remains healthy, but it's still a tough bar. What jumped out at you on the Rule of 40 slide, which is slide number 22 in the report?

Yeah, as we talked about last episode, I prefer to call this metric Rule of 40 Because I think it's confusing to say my Rule of 40 is 49 or my Rule of 40 is 5, but be it what it will. So I will call this R40 score. And the first thing that leaps out is that very, in terms of size segments, only one segment, and surprisingly it's the $1 to $5 million segment, has a median R40 score above 40, i.e., like more than half of companies are not hitting 40 as their R40 score. So in the $5 to $20 million segment, it's 30, and the $20 to $50, it's 15. greater than 50 is 33. Those are all medians. So to a certain extent, this is a loose interpretation of the data, but if you want to think of R40 based on this chart, I'd argue it's a top quartile score, right? It doesn't work across all segments perfectly, but the top quartile comes in at 60, 49, 28, 43, which I can blur over and go, ah, it's around 40. So it seems to me that an R40 score of 40+ is kind of entry ticket to the top quartile.

Yeah, one of the things that jumped out at me on this Rule of 40, and I love the Rule of 40 score clarification, I'm going to adopt that myself. I went back and I looked at Rule of 40 compared to growth rates. So if you look at the $1 to $5 million segment, it has a 45, um, Rule of 40 score. And when you look at their growth rate, it's, um, 58%. So that tells me, yeah, only around a Minus 13%, whether it's free cash flow or EBITDA. So that kind of made sense to me. Then I looked at the 30%, Dave, or the Rule of 40 score was 30 for the $5 to $20 million. When I look at the growth rate there, it was 35%. So that says kind of only a negative 5% free cash flow margin, which kind of makes sense. People are trying to get closer to operating profitability. And then at that $20 million to $50 million, the median is 15%. for the Rule of 40, and the growth rate was 24%. So that tells me, hey, about a -9% on free cash flow margin. So all those kind of made sense to me and also said that we're getting closer to single-digit or 0% operating loss. And that made me feel pretty good, Dave.

It certainly is consistent with the burn rate cuts we saw on the prior slide, right? I mean, even larger companies have cut their burn down to I can't remember what the number was, but it was, what was it? $100K, a couple hundred K a month. Yeah, $113K, $175K, $175K, kind of invariant across size or moderately variant across size. But so yes, it does seem like the free cash flow margins are getting to be pretty low negative. I think there's some danger in comparing medians of different metrics and adding them across distributions. So it's never going to line up just perfectly. But, but I think, you know, loosely interpreted, I agree with what you're saying. And I do think it's consistent with the other slides that burn is definitely down. R40 is a hard bar. By the way, Ray, let's put the bigger issue on the table. I don't even calculate R40 for $5 million or less dollar companies. And I didn't used to calculate for even $10 or $20 million or less. To me, it was kind of a $20 to $50 plus metric. And here they're calculating it. I'm not sure how meaningful it is, to be honest. The other thing I'd want to say, Ray, is I need to see the survey instrument here because I've never seen it. But because are they just asking you what your R40 score is or are they telling you very clearly how to calculate it? Because, right, some people do it on an EBITDA margin, some people do it on AAR, some people do it on revenue as talked about in the last episode. And until I see the instrument or unless I see the instrument, I can't be exactly sure what we're looking at here. If this is just, this is what I think it is. I think it's self-reported R40 score and I'm guessing in the fine print it tells you how to calculate it. So there could be some noise introduced there as well.

Yeah. Totally aligned. Rule of 40. I think we talked about that last episode, maybe even 3 episodes ago. Also that until you get close to $20 million ARR, I don't think it's a very instructive metric at all. But VCs starting, you know, in that $10 to $15 million, they at least want to make sure you're tracking it and to see what type of progress you're making on balanced growth and profitability today. But hey, let's jump to one of the things I love that OpenView has done. And they focus on ARR per FTE. And they started with this median number of employees for each of the segments. And I thought it was just really interesting to see the employee count in each one of these segments, Dave.

Yeah, no, no, no joy in Mudville tonight here. If you look at the 2-year trend on headcount in these segments, it's actually worse than I would have guessed. You know, in $1 to $5 million companies, it's Median is down from 57 to 34. In $5 to $20 million, it's down from 114 employees to 55. So kind of cut in half. From $20 to $50 million, it's down from 226 to 165. So these are huge cuts in headcount executed across 2 years. So it did drop kind of linearly in each segment along the way. But look, this is consistent with the companies I've been working with. People are getting leaner and they're doing it by cutting headcount. Your thoughts, Ray?

Yeah, I also did it, you know, on a percentage basis. And to see that companies were cutting headcount, you know, in 1 million to 5, 5 to 20, and 20 to 50 by, you know, about 27 to 30%, right? It felt like operating expenses would be down even more than what the benchmark showed. But at the same time, I love, you know, the next topic, and that is the ARR per FTE. That really is starting to look healthier than what I've seen historically, Dave.

Yeah. So you want to skip to slide 26 then?

Yeah, let's look at slide 26. What do you think of that?

So first, these guys are doing revenue per employee by ARR. So it's kind of a confusing as heck slide. So we're looking at revenue per employee cut by ARR size. So modest, you know, keep an eye out for that. A lot of people are using the metric Ray was talking about, which is ARR per employee. This isn't that. And, you know, revenue typically So when we look at this, this slide 26, cut by ARR size, the first thing you see to me glaringly is that if there ever was a metric to look at by size segment, this is it, right? Because if you look at the median, here's the progression of medians across the size buckets, 42, 90, 167, 212, 250, right? If you look at CAC payback period, it doesn't vary like that. If you look at gross margin, it does not vary like that across size, even R&D percentage, right?

Yeah. So that's a really interesting thing.

Won't vary like that across size. So, this is a metric that basically to me says you get the benefits of building up your ARR bucket. And one of those benefits is, as you keep and presumably retain more ARR in that bucket, your ARR or revenue per employee goes up over time. That's the first thing I'd observe. The second thing I'd observe is they put a general rule on the slide, which is, hey, try to get to $200,000 to $250,000 at scale.

Yeah.

which they're, I think, defining as around $50 million plus. And I think that's a good rule of thumb that along the way it's going to be a steep climb. But as you're approaching $50 million, you really should be in that $250K range.

Yeah. Yeah. And the other thing, you know, I always love looking at year-over-year trends at the same time. So this is showing this year. But if you go to slide 27, it actually shows that median how this has changed over 2022. And just an example, the $5 to $20 million segment went from $106K per FTE to $167K. And then in the $20 to $50 million segment, it went from $145K to $212K. So it shows a lot of that expense control when trying to increase the cash runway simultaneously really positively impacted this revenue per employee number.

Yeah, absolutely. I mean, it's very consistent with the declining headcount, right? So yes, revenue per FTE has gone up quite a bit. a result of both growing revenue while effectively slashing heads. Let's go to slide 35, which is going to kind of contradict what I just said because they're showing CAC payback period here, uh, and they are showing it varying a lot across size. But frankly, I'm not sure I believe their $1 to $5 million medians. They're saying the median CAC payback period is 8 months for sub-$1 million companies. Don't get it. They're saying the median is 11 months for $1 to $5 million. Usually in my experience, At least in enterprise, it's closer to 20 to 24 at the small segments because you're learning how to sell your systems. Maybe, Ray, this is the impact of the PLG bias that you're worried about. That would be my attempt to explain it. And then when you get bigger, the 5 to 20, 20 to 50, 50 plus, those numbers look more like normal CAC payback periods to me being 14 or 22 months.

Yeah, I will tell you the one thing, and it's not the report because overall this is a very solid benchmark report. I think cutting this by annual contract value is a superior way to look at CAC payback period because I see much higher correlation typically to the higher the ACV, the longer the payback period, but much higher CL— customer lifetime value. So my recommendation to anyone listening to this is look at this, understand it, but if you can find CAC payback periods segmented by ACV It might be even more instructive. And then if it's SLG versus PLG, another great way to look at this one, Dave. And can you believe we're already over 20 minutes?

Yeah. I don't know. You want to cut here, Ray? Do you want to do the last 2 really fast?

Let's, let's get our, our minute round here. Do you want to talk about GDR, gross dollar retention?

Sure. We got to hit the— I'll do it in less than a minute. Basically 85 to 90. That's the answer across size segments. The median GDR is 85 to 90. That's pretty consistent with what I see in other benchmarks. No further conversation needed. NDR across size segments hovering around 100, 102, 104, 102. And again, this is sadly consistent with the new world. I think a year ago it might have hovered around 110, maybe even as high as 120. Now we're hovering around 100 on NRR. So it's, it's, I think they say somewhere in the report, it's gone from land and expand to land and maintain. So that's it for me, Ray, on those last 2 metrics. Back to you.

Yeah, no, I agree. We know that GDR was down 5% year over year from the earlier slide. NDR is down. Last year was around 110%, down to kind of to that 102%, 104%. Very consistent. One of the things we're not going to be able to talk about is expansion ARR as a percentage of total growth ARR. There's some good data in this report where expansion is becoming even more important to that Land and expand comment you just made, Dave. So I think it's another slide that people should really look at is that expansion versus new logo growth rates.

Agree. Look, this is a 52-page report. We're not going to be able to hit them all. Hopefully we hit the highlights for people. You know, my summaries are one, this is a great report. It's kind of a must-have benchmark for $0 to $50 million companies, maybe $0 to $100 million if you're willing to live with the ambiguity of the $50 million plus segment. Growth is down, headcount's down, burn is down, CAC payback is up.

You know, that's consistent with what we're I don't have anything to add to that other than we're going to do another kind of report breakdown next episode from Battery Ventures there. I think they— it's their Q3 2023 update on the state of the cloud. So I'm excited about that one, Dave.

Yeah, me too.

So many good reports coming out these days.

Okay. Thank you everyone for listening to SaaS Talk with my brother CAC and Growth here. Talk to you next week.

Thank you.

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 @Kelblog. Schedectity, which is French for unspellable, is not our actual production location. Thanks for listening.