We've never bought into the idea that growth and sustainable economics are mutually exclusive. Here are some of CB Insights' SaaS & operating metrics.
Today, we announced that we’ve raised a $10 million Series A – our first ever institutional round of financing. We’ve proudly been revenue-funded since inception so we wanted to quickly offer some perspective and metrics & data on why we chose to raise money now. Also, because many folks have asked, we wanted to confirm that our valuation for this round was less than a billion dollars.
The reasons are quite simple.
- Massive market opportunity – We have hundreds of clients and they’ve shown us, through their requests and questions, where they want us to go. And that opportunity is to use data, predictive analytics and AI to help our customers make major business decisions in a way that is more probability-driven and less pundit-driven.
- Insanely good SaaS metrics – We have incredibly strong SaaS business fundamentals / metrics and while we’ve not figured everything out, we felt like we could take $1 of investment and turn it into multiples of that $1. Yes – a scalable, repeatable model. The idea of taking someone else’s money was a burden we didn’t want to take on until we felt very good that we had the right model.
We will cover both of these below.
Massive market opportunity
In our business metrics below, you’ll get some insight into our client base which will give some insights into where we are going. And the products we’re launching today will also give you insights into our future as predictive analytics focused company.
- Ava – An AI-driven tool to introduce you to your future social network. This is the “Instant Bloomberg” for the global private markets. There are professional network tools today that do a good job of inventorying your current network. Ava tells you who you should know and facilitates those introductions.
- CB Insights for Sales – Helping B2B sales organizations identify who their next customer will be
- Private company ratings – Our Company Mosaic scores which can be thought of as a FICO for private high growth companies
- Sensing industry trends – Market Mosaic is a probability-driven way to understand emerging industry attractiveness
- M&A Predictor – Who are the likely acquirers of a company
- Insurance Tech Insights – Research site focused on insurance tech (+ a new insurance tech newsletter)
- Hiring activity tracking – Separate the sheep from the goats with our data on job postings and hiring activity
- Investor – Acquirer search – Build M&A target lists, identify follow-on investors and stalk industry peers in seconds
Insanely Good SaaS Metrics
From day one, we’ve focused on sustainable economics AND growth. We’ve never bought into the idea that these are mutually exclusive or that you need to light money on fire to grow quickly.
If you’re familiar with software-as-a-service (SaaS) businesses, you are likely familiar with the SaaS conversion funnel. There are many variants of it but the simple version we like is the 3 A’s
- Awareness – they know about you
- Affinity – they like you
- Action – they pay you
Below is a breakdown of our metrics across the funnel.
This is the top of the funnel. Getting people to know of us. While website traffic and Twitter followers are a vanity metric to some extent, we’ve seen they also correlate closely with leads generated. And so more website visitors and Twitter followers over time means more leads.
The other area we’ve done very well in is press & media mentions.
We’re at well over 700 press mentions this year and this has been important in establishing our credibility in the marketplace and keeping us top of mind. It is worth noting that a big part of our success here comes from having a research team that can help provide context around our data & analytics to our media friends and having credible accurate data.
Our other big driver of awareness has been our newsletter. At almost 110,000 subscribers and growing at a clip of 1000 more per week, this has been an absolute game changer for us driven largely by our research team who churn out high quality data analysis, predictions and infographics at a rapid rate.
BTW, if not getting our newsletter, you should sign up (like now). It’s free and will make you smarter and more attractive.
Some of you reading this may argue that newsletter subscribers and Twitter followers are really Affinity metrics, and you could be right. But either way, you get the point. More people know about us. This is a good thing.
Once you know us, it is critical that we seem valuable enough that you register for an account. Free trial accounts are our most qualified leads and as the graph below details, our lead velocity has been climbing.
Jason Lemkin points out that lead velocity is one of the most critical metrics in SaaS in this post, and we couldn’t agree more. More qualified leads is a recipe for more revenue in SaaS.
As Jason points out:
But there’s a better metric, your Key Metric, you should track and score yourself to, and hold your VP Marketing and marketing team to – Qualified Lead Velocity Rate (LVR), your growth in qualified leads, measure month-over-month, every month. It’s real time, not lagging, and it clearly predicts your future revenues and growth. And it’s more important strategically than your revenue growth this month or this quarter.
Our free trial account trend over time is detailed below.
Because our product sells for $20-$60k per subscription (a single team or department of up to 10 users), clients don’t just put down their credit card and buy (well – sometimes they do but not usually). And so as a result, we have to do web demos. Here is our trend in web demos over time. They are also growing.
Although this is trending well, we know there is a massive opportunity here to increase the demo:lead ratio. If you think you could help us do that, we’re hiring like crazy in technology, marketing, sales – everywhere.
We’re not quite ready to share Action metrics, i.e. revenue it’s growing fast.
Other SaaS Metrics
What we’ve been working on over time based on feedback from customers are data and probability-driven tools that help corporate and business development teams. This is a much larger opportunity than the deal-maker market which we expect to capture but which doesn’t offer an opportunity to build a $500 million revenue business.
Below is a graph of our new clients over time. Corporates and other which includes B2B sales teams are an increasingly larger share of our customer base.
Hubspot is a SaaS company we greatly admire and although in a very different space, our playbooks are similar (heavy on content). When we compare our SaaS fundamentals versus Hubspot’s, we come out looking pretty good.
The below Hubspot metrics are taken from Tomasz Tunguz’ excellent brief benchmarking Hubspot’s IPO.
Our LTV/CAC is 22.9x to their 3.9x. We expect this will decline a bit over time as we invest more aggressively in marketing and sales but needless to say, we believe we’re starting from a position of strength as our fundamentals are very solid.
In the below table, we also threw in our entire operating expense (not just customer acquisition cost) as a way to be hyper-conservative and calculated the LTV/OpEx ratio, and it stands at 8.3x.
In a last hyper conservative case, if we halved our LTV and doubled our CAC, the LTV/CAC would stand at 5.73x.
Here is CB Insights vs Hubspot vs the 3x LTV/CAC rule of thumb that many smart folks point to (folks like Dave Kellogg)
We’ve focused this year on land & expand with existing customers and as a result of product capabilities we’ve rolled out, we’ve been successful in having a negative net revenue churn due to upsells.
When we started, it was the founders selling and then our first sales hire who has gone on to become the Director heading up sales. What we’ve seen is that we have the early indications of a repeatable sales process that can be learned and mastered by talented Account Executives. October 2015 was our largest sales month ever and most of the sales came from Account Execs who’d been with the company less than 6 months. The ramp-up for new sales folks has been incredibly quick.
The quick ramp is due to three things:
- A well-defined onboarding and training process
- An intuitive product that provides real value to customers
- Being extremely selective in who we hire for the sales team
If you are in sales (SDR, AE, MRR) and have a successful track record, are smart and driven and looking for a company with an immense untapped opportunity in front of it, we’re hiring.
Our churn has been minimal even while we’ve consistently raised pricing. Typically, we raise pricing every 8 months with new product capabilities. The average team subscription rates are below.
What our pricing and the below don’t tell is the number of subscriptions we are now selling with single corporations. Several of our largest corporate clients have 4-8 unique subscriptions to CB Insights.
We hope the above is useful for other SaaS entrepreneurs who are looking for some real-life examples and shines some light on why we chose to raise now.
Thanks for reading.
Now back to building.
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