Capchase Report: Software Startups See Core Metrics Improve Amid Ongoing Challenges
The latest Pulse of SaaS report shows how changing economic factors have impacted more than 500 Software-as-a-Service companies with annual recurring revenue from $1 million to $10 million.
Capchase, the revenue acceleration platform for Software-as-a-Service (SaaS) companies, today announced its fifth Pulse of SaaS report, analyzing 10 core metrics of SaaS companies to understand recent trends based on annual recurring revenue (ARR).
The report revealed software buyers are harder to acquire, slowing contract purchases and extending payment timelines, reflecting increased contract scrutiny and challenges in overdue invoice collections. Despite these obstacles, the industry remains resilient, with varied trends observed across businesses of all sizes.
Highlights from the Capchase Pulse of SaaS analysis include:
- The cost of acquiring customers increased: The Lifetime Value of contracts sold (LTV) compared to Customer Acquisition Cost (CAC) or LTV/CAC for high-growth stage companies nearly halved from 2021 to 2023, indicating increases in CAC outpaced the customer LTV during the period. Efficient CAC spending, higher retention, and effective pricing drive a healthy LTV/CAC.
- Days sales outstanding (DSO) expanded: The median DSO, the amount of time it takes for an invoice to get paid, increased from 31 to 40 days. Companies with ARR between $1 million and $9.9 million face the longest DSO and a greater risk of revenue leakage as unpaid invoices get lost or forgotten.
- ARR per employee improved: The median ARR per employee for companies of all sizes has increased by $20,000. Reflective of hiring efforts focused on efficiency, avoiding hiring sprees, and selecting talent more cautiously, proving growth and efficiency can coexist with a strategy focused on long-term success.
- Sales cycles lengthened: As the industry has become more competitive and more scrutiny applied to contract decisions, smaller companies experienced the most significant increase in sales cycle length from 2021 to 2023—this impacts other metrics, including CAC, CAC payback, and annual contract value.
“The SaaS industry has undergone immense change over the last two years, and our latest report shows how the industry has adapted to these changes based on hiring efficiency, product fit, sales efficacy, and overall financial health,” said Miguel Fernandez, co-founder and CEO of Capchase. “The underlying factors responsible for the industry’s strength vary greatly by company size, and these benchmarks help all companies pinpoint business operations that can be improved for better efficiency and growth.”
The highlights and other insights from the Pulse of SaaS report underscore the need for solutions to automate collections, improve sales velocity, and address efficiency. At the same time, it shows the industry continues to adapt to changes in the market for sustained growth. Capchase supports high-growth SaaS companies to sustain momentum, capture unrealized revenue, and make buying software easier through its financing and payment products, such as Capchase Grow, Capchase Collect, and Capchase Pay.
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