SaaStr 637: Unveiling the Data Behind Effective Scaling with ICONIQ Growth General Partner Doug Pepper and ICONIQ Growth Partner & Head of Analytics Christine Edmonds

The SaaS benchmarks that broke when 2022 plans missed

ICONIQ Growth's dataset from more than 90 technology companies shows what best-in-class scaling looked like and how abruptly it changed in 2022. Top quartile companies double ARR in two to three years on retention above 120% and expansion-led growth, shifting spend from R&D toward go-to-market as they scale. Then median plan attainment fell from 99% to 87% in one quarter and most companies slowed hiring to land below planned headcount. Doug Pepper still calls growth the most important metric.

Takeaways

• Top quartile companies double ARR in three years. ICONIQ's top quartile companies double ARR in their first two to three years and keep compounding at roughly 1.5x into IPO, adding $15m to $25m of net new ARR each year. The data spans more than 90 companies and almost a decade.
• Net dollar retention runs above 120%. Median gross dollar retention is 90% to 93% and net dollar retention is 120% or more, with Datadog and Snowflake well above 150%. Companies selling to SMBs land in the high 80s on gross retention.
• Early logos build the base for expansion. Companies lean more on expansion than new logos for gross ARR contribution over time, so winning logos early builds the expansion base and avoids customer concentration. At Marketo, Doug Pepper watched the chief customer officer's net new ARR pass the VP of sales' at around $150m ARR.
• Spend shifts from R&D to go-to-market. Personnel is 60% to 75% of costs, and OpEx per full-time employee runs $200,000 to $220,000 into IPO. By year five, R&D falls from about 30% to 25% of OpEx while sales and marketing rises from 50% to 60%.
• Burn multiples ran high, then normalized. A company adding $10m of net new ARR typically burns about $20m, a 2x burn multiple, moving toward one-to-one by year five. Over the last two years companies burned three to five times their net new ARR.
• Plan attainment broke in mid-2022. Median attainment of net new bookings plans was near 100% in 2021 and 99% in the first quarter of 2022, then 87% in the second. In Q1, 95% of public companies beat plan and almost 80% raised guidance. By Q2, only half raised, a median 2%.

How the portfolio reset spending

• About 20% of ICONIQ's portfolio did layoffs, which Doug Pepper calls probably the hardest thing for a CEO to do, and another 20% froze hiring.
• Roughly 60% slowed hiring and will likely end the year 10% to 20% below planned headcount.
• Companies held off launching new products and new verticals, and pulled back on international expansion.
• Boards asked whether go-to-market leadership and the second layer could carry the company past $10m ARR.