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State of SaaS2019
Survey of 116 revenuegenerating Finnish B2BSaaS companies
Vendep Capital is the only pure SaaS investor inFinland, investing from its €36M pre-A venturefund (2017 vintage). The firm was founded bythree partners who have complementarybackgrounds as entrepreneurs, investors andgeneral managers and who have investedtogether since 2011.
Vendep invests in the best SaaS teams in Finland(marketplaces and b2b so�ware) when earlymetrics show market validation abroad and theteam has a solid plan for scaling further. Typically,the initial investment goes into marketing andsales and establishing operations in the EuropeanHUBs (London, Berlin, Amsterdam) or in the US.
Vendep Capital
State of SaaS 2019
Business Finland is the most important publicinnovation funding and internationalizationpartner in Finland for the global so�wareindustry. Business Finland has decades ofexperience in accelerating the Finnish so�wareindustry in tight cooperation with companies,research organizations and interest groups.Business Finland provides so�ware companiesregistered in Finland e.g. funding for marketsurveys and R&D, organizes international fairvisits and o�ers data from target markets, attractsprivate investments and builds global so�wareecosystems in Finland.
BusinessFinland
State of SaaS 2019
Tesi (Finnish Industry Investment Ltd) is a state-owned investment company that wants to raiseFinland to the front ranks of renewing economicgrowth by investing in funds and directly in com-panies.
Tesi invests profitably and responsibly, togetherwith co-investors, to create the world’s new suc-cess stories. The investments under managementtotal 1.2 billion euros.
Ambition for ownership and success
Teollisuus-sijoitus
State of SaaS 2019
This report analyses the results of a survey ofFinnish SaaS companies conducted in June-July2019. It represents responses from 116executives of revenue generating businessesusing 2018 figures. This report is an annual seriesof studies on the state of the Finnish SaaSbusinesses. For a discussion of the results and to sign up forfuture surveys, please visit www.stateofsaas.fi
About thesurvey
State of SaaS 2019
Most survey respondents (74%) reside in thecapital region, primarily in Helsinki and Espoo.This is 2% more than last year.
HQ Location
State of SaaS 2019
Unsurprisingly, as companies raise capital, themedian ownership of the operative teamdecreases.
Ownership
State of SaaS 2019
Most companies consider Europe and NorthAmerica to be their target markets.
Compared to last year, there is noticeably moreinterest towards the Asia-Pacific region – a thirdsee APAC as a future market as opposed to 14%from last year. The same applies to the MiddleEast.
Targetmarkets
State of SaaS 2019
The 116 respondents employ 1600 people inFinland and 350 abroad. In total, 44% work inR&D and 32% in sales & marketing.
Employment
State of SaaS 2019
Companies in the top quartile grow more thantwice as fast as the median company. They alsohave a more positive outlook on future growth.
Top growers seem to be generally moreproductive with their sales and marketing spend.
ARR Growth
State of SaaS 2019
Unsurprisingly, the growth rate correlates withsales and marketing spend.
The fastest growing group (200%+) were internetcompanies with lower customer acquisition costsand consisting mostly of respondents with amedian ARR of €305 k.
Sales andMarketing
Spend
State of SaaS 2019
Companies in the top quartile grow over 100% inmost of the sales models (the channel salessample rate is low).
Sales Model
and Churn
State of SaaS 2019
Unsurprisingly, the internet sales model has thehighest median growth and churn. They alsohave the most revenue from outside Finland(94%).
The amount of revenue from Finnish customerswas quite similar across ARR categories.However, companies with a majority ofcustomers from Finland have lower churn.
FinnishRevenues
State of SaaS 2019
Two-thirds of SaaS products are horizontalapplications.
Vertical applications are easier to sell throughchannels, while a horizontal SaaS more o�enrequires a mixed sales model.
The main di�erence comes in marketing spend,which is 2:1 for horizontal vs. vertical applicationcompanies.
Horizontaland
Vertical SaaS
State of SaaS 2019
Companies in the top quartile grow 100% ormore irrespective of the customer segment.
42% of revenues come from the enterprisecustomer segment and 34% from the mid. Churnis naturally lower with larger customers.
CustomerSegments
State of SaaS 2019
Churn rates vary significantly.
Smaller contracts have naturally higher churnrates. In this survey, €10-20 k contracts haveunusually high churn rates.
Long-term, and for larger companies, a goodtarget euro churn rate is 5-7% annually.
Key Bank’s 2017 SaaS Survey of >$5 M ARRcompa- nies showed a median dollar churn of 8%annually. Finnish B2B SaaS companies appear tobe slightly below that at 7.4%.
Churn Rate
State of SaaS 2019
As highlighted, 32% of respondents spend over 2euros to get 1 euro in ARR.
Less than 12 months is a good payback time forcustomer aquisition costs (CAC)*, as achieved by44% of respondents. They spend less than 1 euroto get 1 euro in ARR.
The CAC payback time varies greatly among thedi�erent ARR categories, and the data does notindicate any trends.
CAC Payback
Time
* forentrepreneurs.com/saas-metrics
State of SaaS 2019
Contract length increases with contract size.
Over 80% of the deals in the €20 k+ contract sizecategory are 12 months or longer. Out of these,only a third invoice the customer 1 year inadvance.
ContractLength
State of SaaS 2019
As was the case last year, sales and scaling to newmarkets are the biggest issues.
Issues
State of SaaS 2019
AWS has solidified its market leadership amongFinnish SaaS companies as the main cloudservice provider.
Only 13% use self-managed servers as opposedto 18% last year.
CloudHosting
State of SaaS 2019
40% of companies give discounts for multi-termcontracts (median discount 15%).
Companies with inbound/internet sales modelshave short contracts and give discounts.
From those that had mostly 1-year contracts,only a third o�ered discounts for multi-termdeals (the median discount was again 15%).
Discounts
State of SaaS 2019
Most of the agreements renew automatically withminor di�erences between di�erent contractsizes.
Time-limited trials are by far the most populartrial across all contract sizes. The amount of freetrials used decreases naturally with increasingACV.
AutomatedRenewalsand Free
Trials
State of SaaS 2019
Respondents were asked for an opinion on theircurrent valuation.
Growth rates are a major determinant ofvaluation, as can be seen from the graph.
Valuation
State of SaaS 2019
ARR – annual recurring revenue The annualised value of current recurringsubscriptions at a point in time
CAC – customer acquisition cost Total sales and marketing costs divided by thenumber of new customers over a period oftime
ACV – average contract value Calculated as ARR divided by the number ofcustomers
Euro churn The amount of revenue forfeited with lostcustomers over a period of time (this surveyuses annual figures)
Logo churn The amount of customers lost over a period oftime
Key Terms
Sales models: Direct Face-to-face meetings with customers inthe field
Inside Sales that originate from the company’soutbound digital or other sales activity
Internet Sales that originate from an inboundcustomer interaction
Channel Sales originated by 3rd parties (VAR, OEMsetc)
Mixed Where no sales model is used twice asmuch as any other one
A SaaS company with early traction has alreadyraised over €300 k since incorporation. Themedian growth rate is 77% with a 10% eurochurn. The field sales model dominates with 4people involved in sales and marketing out of 9total.
40% list sales as their biggest challenge. 60% ofthe revenue comes from Finland with servicesmaking up 18% of the total revenue. The medianownership by the operative team is 60%.
Category Profile:€0—300 k ARR
State of SaaS 2019
A SaaS company with early traction has raised al-most €500 k within 6 years since incorporation.The median growth rate is 67% with low churn.Direct sales dominate with 4 people involved insales and marketing out of 15 total.
Over 40% of the revenue comes from non-domestic customers with only 7% of revenuecoming from services. The median ownership bythe operative team is 61%. A third of theworkforce is located outside of Finland. Thebiggest challenges revolve around marketing,sales and scaling.
Category Profile:€300 k—1 M ARR
State of SaaS 2019
50% of the revenue to these companies comesfrom domestic customers. The median eurochurn rate is low (7% annually) but so is growth(30% annually). The median capital raised is €755k but 25% have raised nothing. Ownership by theopera- tive team is 78%, which is surprisinglyhigher than for smaller companies. Servicesaccount for 5% of revenues.
40% list HR as their biggest challenge. 76% of the21 employees are located in Finland.
Category Profile:€1—2.5 M ARR
State of SaaS 2019
The largest companies surveyed follow the trendset by smaller companies: The annual euro churnrate is around 12% with 56% of revenue comingfrom Finnish customers. 50% target enterprise cus-tomers using the field sales model. Median growthis slow at 36% and the same is expected tocontinue next year.
30% of the median 67 employees are in sales andmarketing with 86% of the workforce residing inFinland. These companies have raised almost €3 Min financing in their 5 years in the market.
Category Profile:€2.5 M+ ARR
State of SaaS 2019
SaaS Fundingin Finland2016-2018
Total funding raised by SaaScompanies during 2016–2018was €506 M over 365 rounds
State of SaaS 2019
Investor activity varies according tofund strategy and lifecycle
State of SaaS 2019
Almost all investors in Finland investin the Seed stage
State of SaaS 2019
Median amounts raised at each stageare generally below European and
US figures
State of SaaS 2019
Largest rounds by stage and year
State of SaaS 2019
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State of SaaS 2019
State of SaaS 2019
Survey Partners
State of SaaS 2019
Layout and infographics: Liisa Valtonen