SaaS Cash Efficiency was strong in 2023

How cash efficient were SaaS companies in 2023? We pulled the data from annual filings for the 62 SaaS companies that have gone public since October 2017 (and are still public; some sold and went private, like UserTesting). Measuring cash efficiency is simple: we look at the change in revenue for the year, divided by operating loss for the year. In other words, cash efficiency measures how much new revenue is created for each dollar of operating loss in any given year.

In 2023, these 62 companies on median and average generated $0.81 and $1.46 of new revenue for every $1 of loss. Those are fantastic numbers, because good SaaS companies tend to have 100%+ net dollar retention, meaning the $0.81 recurs year after year, and grows. At $0.81, your payback is a low 1.24 years, and so long as NDR is over 100%, you never lose that overall revenue. Data and notes are below:

Excludes ‘profitable’ and ‘no growth’. The $0.81 and $1.46 figures exclude those companies that are profitable (20 companies), have no growth (4 companies), or were acquired between 2017 a and 2023 (7 companies). That leaves 31 companies that generated an operating loss in 2023 in order to grow.

The cost of profitability. The cost of profitability is the growth you forego by not burning cash. In this case, the profitable companies had median growth of 13%, which is pretty ho-hum. Those that burned cash and had $0.81 cash efficiency grew at a rate of 23% YOY on median. That’s a very large difference, and when compounded over many years with 100% net dollar retention is even more meaningful.

The lesson in our view is that some level of cash burn is good and even valuable when it means accelerated growth, so long as you’re cash efficient. Stay in the ~$0.81 cent range and you’ll be in very good company.

Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Email the author at sammy@blossomstreetventures.com.