2020
SAAS PRODUCT
BENCHMARKS
SAM RICHARD & KYLE POYAR
2
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
Customer
Journey
Insights
TABLE OF CONTENTS
Features:
PLG Insights &
COVID-19
Introduction
Participant
Overview
Team
Insights
Acquisition
& Retention
Insights
Product
Metrics
2
5
7
6
1
3
4
INTRODUCTION
To make the best strategic decisions and be
held accountable in their roles, product and
growth professionals need objective data.
That’s why we conducted our first annual
SaaS Product Benchmarks Survey—the
findings enable operators to compare
themselves with their peers across the
metrics they use most. Think of this report as
your go-to resource for building better
products.
“Product owners who are taking a
product-led approach—measuring
usage, experimenting with new ideas
and providing value for their users at
low to no cost—end up building high-
growth, enduring businesses.”
– Sam Richard
Director of Growth at OpenView
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved.
4
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
THE PARTNERS WHO MADE IT POSSIBLE
WHO TOOK
THE SURVEY
6
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
DI S TR I B U T I O N B Y G E O G R A PHY
DI S TR I B U T I O N B Y A R R
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
62%
19%
5%
10%
4%
US
Europe
Canada
APAC Other
28%
20%
14%
25%
8%
6%
<$1M $1-5M $5-10M $10-30M $30-100M $100M+
7
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
29%
50%
11%
10%
Vertical application
Horizontal application
Infrastructure / developer software
Other
DI S TR I B U T I O N B Y
TA R G E T C U S TO ME R S I Z E *
DI S TR I B U T I O N B Y
SO F TWA R E C ATE G O RY
18%
44%
54%
39%
Very small business
(VSB, <20 employees)
SMB (20-100 employees)
Midmarket (101-1,000 employees)
Enterprise (>1,000 employees)
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Note: Respondents could select up to two responses.
PRODUCT LED GROWTH
INSIGHTS
9
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
WHAT IS PRODUCT LED GROWTH?
Product led growth (PLG) is an end-user focused growth
model that relies on the product itself as the primary driver of
customer acquisition, conversion and expansion.
Many of the fastest growing software companies, including
standout public companies, employ PLG.
10
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
0%
20%
40%
60%
80%
100%
120%
<$1M
$1-2.5M
$2.5-10M
$10-20M
$20-50M
>$50M
PLG
Non-PLG
PRODUCT LED BUSINESSES GROW
FASTER AT SCALE
• PLG companies grow slowly in their early
days, as it takes time to build a community
of free users and convert those users to
paying customers.
• After $10M in ARR, the magic of PLG kicks
in and these companies can scale faster.
They aren’t as limited by their ability to hire,
onboard and feed leads to enterprise sales
reps, and they’ve built up significant
goodwill from their users.
ARR Scale
Source: 2019 OpenView SaaS Metrics Survey, N=639. PLG Companies defined as
those leveraging more than three of the 9 PLG strategies surveyed.
Median Growth Rate
11
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
PRODUCT LED GROWTH IS YOUR
SECRET WEAPON
12
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
COVID-19 PROVES PRODUCT LED GROWTH IS YOUR
SECRET WEAPON DURING A DOWNTURN
• While much of the data for this report was
collected from Q4 2019 (Pre-COVID-19), it’s
important to understand how well PLG
companies are performing.
• Before COVID-19 impacted the market, the
PLG index and the SaaS index were trading
at similar rates. After four months of an
unprecedented global crisis, SaaS
companies are bouncing back while PLG
businesses are trading at almost 2x higher
revenue multiples than they started with.
Source: Pitchbook. PLG Companies can be found on the PLG Index here.
0
2
4
6
8
10
12
14
16
18
2/14/202/21/202/28/203/6/203/13/203/20/203/27/204/3/20
4/1
0/2
0
4/1
7/2
0
4/2
4/2
0
5/1
/20
5/8
/20
5/1
5/2
0
5/2
2/2
0
5/2
9/2
0
PLG Index
SaaS Index
EV/FY 2020E Revenue Multiple
Date
CUSTOMER JOURNEY
INSIGHTS
14
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
WEB-TO-FREE ACCOUNT CONVERSION
• For SaaS businesses with a freemium
product or a free trial, getting users
into the product is the single biggest
source of leads.
• While conversion rates from the web
to your product can vary dramatically,
it’s clear that high-growth businesses
have a wider top of funnel to work
with from the start.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
ARR Growth
0%
2%
4%
6%
8%
10%
12%
Low Growth (0-100%)
High Growth (100-250+%)
Bottom Quartile
Median
Top Quartile
Conversion from Web Visit to Free Account
Signup (% ARR Growth)
15
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
FREE-TO-PAID ACCOUNT CONVERSION
• At first glance, high-growth
businesses don’t have much of an
edge on low-growth businesses in
their free-to-paid conversion rate.
But note that high-growth
businesses have much larger web-
to-free conversion rates,
generating a larger top of funnel to
convert over time.
• Note: Conversion from free to paid was
measured in 12-month cohorts.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
ARR Growth
0%
5%
10%
15%
20%
25%
30%
Low Growth (0-100%)
High Growth (100-250+%)
Bottom Quartile
Median
Top Quartile
Conversion from Free Account to Paid Account
(% ARR Growth)
16
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
FREEMIUM OR FREE TRIAL CONVERSION
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
GTM motion
0%
5%
10%
15%
20%
25%
Freemium Product
Product with Free Trial
Bottom Quartile
Median
Top Quartile
Conversion from Free Account to Paid Account Freemium or Free Trial
17
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
OUTREACH TO FREE ACCOUNTS
•
It’s no secret that your product is the best way to
generate leads.
• Most software companies with a free trial or
freemium model leverage their product to the
fullest by reaching out to prospects who are
using their tools.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Outreach Mix (% Performing outreach to free accounts)
90%
10%
Reach out to Free Users Don't Reach out to Free Users
18
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
CONVERSION AND OUTREACH TYPE
• At first glance, for the average
company it doesn’t matter which
team owns outreach to new
signups so long as they’re sales or
customer success.
• Note that top-tier teams deploy
sales in a way that makes a big
difference on conversion rates.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Team responsible for outreach
0%
5%
10%
15%
20%
25%
30%
Success
Sales
Support
No Outreach
Bottom Quartile
Median
Top Quartile
Conversion from Free to Paid Account (Team Performing Outreach)
19
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
TOUCHPOINTS AND CONVERSION RATE
• The real differentiator for conversion rates
for free trials or freemium products isn’t
whether you’re reaching out to users,
it’s how persistent your messaging is.
• Conversion rates increase as software
companies add touchpoints with
prospects. 11+ touchpoints performed
2x higher than other sales and
marketing cadences.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Touchpoints during free trial or freemium use
Conversion from Free Account to Paid Account
8%
11%
28%
1 to 3 touchpoints
4 to 10 touchpoints
11+ touchpoints
Axis Title
ACQUISITION AND
RETENTION
21
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
ACQUISITION CHANNEL MIX BY CUSTOMER TYPE
• Organic traffic to your website
represents a combination of marketing
activities including press, social and
referrals from one user to another.
• Overall, organic traffic seems to be
most common for companies selling to
smaller businesses, while sales is most
popular at companies that go after
Enterprises, which probably have
larger deal sizes.
Target Customer Type
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
45%
44%
42%
33%
29%
21%
15%
13%
17%
24%
10%
41%
9%
11%
33%
13%
VSB
SMB
Midmarket
Enterprise
Organic Traffic
Paid Marketing
Sales Generated
Other
Average Percent of Leads by Acquisition Channel
22
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
DOMINANT1 ACQUISITION CHANNEL
AND CONVERSION
• Organic channels, where users find your
product via word of mouth, content, social
shares or by directly accessing your website,
result in much higher end-of-funnel conversion
rates for businesses that leverage them as
their dominant acquisition channel.
• Paid marketing like SEM, retargeting ads and
paid social should never be your primary
acquisition motion because of the combined
cost and conversion challenges.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
1. Dominant channel accounts for >50% of web visitors.
Dominant Acquisition Channel
Conversion from Free Account to Paid Account
18%
25%
6%
Sales Generated
Organic Traffic
Paid Marketing
23
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
RETENTION RATES BY GTM APPROACH
• Retention is key to building an
enduring software business.
Especially for businesses with
a free trial or freemium motion,
this retention of users within the
product, even just a month after
signup, can prove difficult.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Go-to-Market Approach
0%
10%
20%
30%
40%
50%
60%
70%
Freemium Product
Free Trial
Bottom Quartile
Median
Top Quartile
Retention Rate After One Month by GTM Approach
PRODUCT METRICS
25
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
ACTIVATION
• Product activation is the moment when your
product delivers on the value that it promised.
Getting a user isn’t enough—they must find value
in your product.
• Companies that offer a free version or trial of
their product are 2.5x more likely to measure
that “aha” moment for users than their
counterparts who don’t allow users to try the
product before purchase.
Responses
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153
39%
62%
42%
18%
18%
20%
Have a free trial or
product
No free trial or
product
No Activation Metric
Yes, we measure activation
Multiple activation metr ics
Organizations Measuring Activation
26
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
ACTIVATION RATE BENCHMARKS
•
It’s important to note that in
OpenView’s work with best-in-class
product led companies, we’ve seen
activation rates average around 33%.
•
It makes sense that activation would
be lower for freemium products, as
they have a wider top of funnel than
tools that offer a free trial, and a free
trial makes users feel that the clock is
ticking on product use.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Go-to-Market Approach
0%
10%
20%
30%
40%
50%
60%
70%
Freemium Product
Free Trial
Bottom Quartile
Median
Top Quartile
Activation Rate by GTM Approach
27
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
PQL METRICS
• A product qualified lead (PQL) is occasionally
confused with an activation metric. A true
activation point can occur for a user only once,
while PQLs can be made up of multiple layers
of engagement in the product.
•
It’s evident that this confusion between the two
metrics is common at software companies, as
most aren’t creating or tracking PQLs.
38%
37%
25%
No
No, but it’s on our roadmap
Yes, we have a PQL metric
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Respondents Tracking PQL
28
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
HOW TO CALCULATE YOUR
NATURAL RATE OF GROWTH (NRG)
NRG = 100 x
Annual
Rate of
Growth
x
% of
Organic
Signups
x
% of ARR
Products
29
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
NATURAL RATE OF GROWTH
• OpenView uses the Natural Rate of Growth
(NRG) metric to better understand the growth
engine inside of a company if you were to
strip away the sales and marketing engine.
• While the NRG for everyone who took our
survey was low compared to heavy-hitters
like Slack, it’s clear from the data that while
medians are the same across go-to-market
approaches, best-in-class freemium software
companies have extremely high NRGs.
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Go-to-Market Approach
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Freemium Product
Free Trial
Sales
Bottom Quartile
Median
Top Quartile
Natural Rate of Growth by GTM approach
30
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
DAILY, WEEKLY AND MONTHLY ACTIVE USE
• Historically, SaaS companies have worked to
understand user engagement with their product
by measuring if users were active on a daily,
weekly or monthly basis.
• This practice seems to remain common at
software companies today.
15%
28%
38%
6%
14%
DAU
WAU
MAU
Not anymore
Not tracking
Source: 2020 OpenView SaaS Product Benchmarks Survey, N=153.
Respondents Tracking Daily Active Use (DAU),
Weekly Active Use (WAU), Monthly Active Use (MAU)
or Aren’t Tracking Anymore
TEAM MAKEUP
32
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
INVESTMENT IN R&D: DOES IT DRIVE GROWTH?
• Note: We defined R&D roles as FTEs in
Product or Engineering departments.
Most companies surveyed are heavy
on R&D employees overall, but higher
growth organizations make more of an
investment in R&D.
• This percentage flattens as a company
gains in ARR, as most businesses need
to add more heads in GTM roles.
Source: 2020 OpenView Product SaaS Benchmarks Survey, N=153.
Company ARR Growth Rate
39%
44%
46%
34%
36%
38%
40%
42%
44%
46%
48%
Low Growth (0-100%)
High Growth (100-250%)
Super High Growth
(250%+)
Median Percent of Employees in R&D Roles
33
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
GROWTH TEAMS: DO THEY DRIVE GROWTH?
• Based on responses from the businesses
that participated, the size of your “Growth
Team” doesn’t correlate with how quickly
your business is growing.
• Some organizations decide to create
“Growth Squads” made up of individual
leaders from other focus areas in the
organization to tackle the biggest
opportunities for growth.
Source: 2020 OpenView Product SaaS Benchmarks Survey, N=153.
Company ARR Growth Rate
63%
61%
46%
10%
13%
8%
28%
26%
46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Low Growth (0-100%)
High Growth (100-250%)
Super High Growth
(250%+)
No One Responsible
One Growth Person
Growth Team
Size of Growth Team by Growth Rate
34
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
ARE GROWTH TEAMS RUNNING EXPERIMENTS?
• Growth is a team sport, so it
must involve many other
functions, but having at least
one growth hire in place
makes companies at least 2x
more likely to be running
experiments on a regular
basis.
Source: 2020 OpenView Product SaaS Benchmarks Survey, N=153.
Number of Monthly Growth Experiments by Growth Team Size
None
1-3
Experiments
4-10
Experiments
No One
Responsible
77%
23%
0%
Yes, One
Person
44%
44%
13%
Yes, Growth
Team
19%
72%
9%
35
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
MONTHLY GROWTH EXPERIMENTS
• We found that running growth
experiments correlated much
more strongly with growth rates.
•
It’s worth getting buy-in from
stakeholders on your experiment
roadmap to better understand
what hypotheses other teams feel
would have the biggest impact on
the business.
Source: 2020 OpenView Product SaaS Benchmarks Survey, N=153.
Company ARR Growth Rate
57%
41%
43%
59%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Low Growth (0-100%)
High Growth (100-250%)
No Experiments
1-3 Experiments
Number of Monthly Growth Experiments by Growth Rate
ABOUT THE
AUTHORS
37
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
SAM RICHARD
Sam Richard is Director of Growth at OpenView,
helping our portfolio accelerate top-line growth
through establishing best practices and processes
to support product led growth. At OpenView, Sam
works closely with portfolio leadership teams to
discover and implement the most impactful
strategies for improving the customer journey,
including onboarding and retention optimization,
expansion strategy, funnel optimization and
channel/partner strategy.
sam@ov.vc
@samcrichard
/sam-crowell-richard
Director of Growth
38
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
KYLE POYAR
Kyle helps OpenView’s portfolio companies
accelerate top-line growth through deep insights
into their market landscape and customers. He
leads segmentation, positioning, channel/partner
strategy, new market entry and packaging/pricing
initiatives, partnering closely with portfolio
leadership teams.
VP, Market Strategy
kyle@ov.vc
@poyark
/kyle-poyar
39
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
Our mission is to improve people’s
working lives.
We do this by:
•
Investing in the best software
companies
• Helping our portfolio companies
accelerate growth and become
market leaders
Learn more at ov.vc
THE EXPANSION STAGE SOFTWARE VC
THANK YOU!
41
O V | 2 0 2 0 S A A S P R O D U C T B E N C H M A R K S
Proprietary ©2020 OpenView Advisors, LLC. All Rights Reserved
PRODUCT PERFORMANCE BENCHMARKS
S I Z E A N D G R O W T H
Percen t R&D Employees
% of full-time equivalent product and engineering employees at the end of 2019
Annual Recur r ing Revenue (ARR)
Company annual recurring revenue (ARR) scale at the end of 2019
YoY Growth Rate
Change in annual recurring revenue at the end of 2019 vs. 2018
C U S T O M E R J O U R N E Y
Free - to -Pa id Convers ion
The conversion rate from a free trial or freemium product to a paying customer within 12 months of signup
Se l f -Se rve Convers ion
Users who convert on their own without assistance from sales
User s Who Rece ive Out reach
% of all free (trial or freemium) users who receive proactive outreach from sales, success or support
A C Q U S I T I O N + R E T E N T I O N
Organ ic Acqui s i t ion
% of web traffic from word of mouth, direct traffic, press, search, content or social media
Re ten t ion
% of users from the Q4 2019 cohort that were still using the product after a month
M E T R I C S
Act i va t ion
% of new users that have achieved some initial success with the product e.g. by taking certain high value actions
Natura l Ra te o f Growth
Annual Growth rate * % Organic Signups * % ARR that starts in the product