Average Contract Value is (“ACV”) is a vanity metric that is a byproduct of your business model, not a driver of it. Driving ACV shouldn’t be a primary goal. Here is why:
ACV at IPO has almost no relationship to success. Below are the last 81 SaaS companies to go public and their estimated ACVs at IPO. To do the analysis, we compared each company’s annual revenue at IPO to its number of customers. The range is very wide. Dropbox went public with an ACV of about $101 and 11 million customers. Palantir went public with an ACV of $5.9 million and 125 customers. That is a difference of nearly 60,000x, and both reached IPO scale. The median ACV across the group was $55k and the median customer count was 4,300.
There are two ways to build the same revenue. Median revenue at IPO was $199mm. Docusign ($1,481 ACV, 350,000 customers), Slack ($4,552, 88,000), Cloudflare ($2,838, 67,899) and Figma ($1,664, 450,000) got to scale with a huge number of small customers. Datadog ($22.5k), Crowdstrike ($168k) and Dynatrace ($745k) got there with fewer, bigger ones. Revenue is ACV times customers, and either variable can get you there. High ACV alone is not a requirement.
Increases in ACV aren’t free. Usually in order to increase ACV, some other metric of importance gets worse. The sales cycle gets longer, the close ratio comes down, and the number of leads needed to complete a sale goes up. You have to focus on larger clients, which means more layers of approval, more time identifying the decision maker, and more bureaucracy to fight through. The Bridge Group’s 2026 survey of AEs showed win rates trend down as ASP rises, stakeholder count and cycle length rise with ACV, and companies require more experienced (and more expensive) reps.
The right way to grow ACV is to land and expand. If you want ACV to go up, let it be the result of retention and expansion. Median net dollar retention for public SaaS is around 110%, which means the average customer is paying more every year without anyone changing how the company sells. Price on value instead of seats, and cross-sell adjacent products into the customers you already have. Both raise ACV without forcing you to chase bigger logos.
ACV is a metric that should be monitored. Note the trend so you can identify your ideal customer, but don’t change the way you sell or how you price in order to artificially increase it. The real metrics you should be focused on are revenue, cash efficiency, and retention.
Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Other resources we’ve built for founders include: SoftwareMultiples.com; softwareMRRcalculator.com; FounderInvited.com, and TwoFoundersTalk.com. Founders are always welcome to reach out to sammy@blossomstreetventures.com as well.