Sammy is the Managing Director and Cofounder of Blossom Street Ventures. Connect on LinkedIn or email him directly at firstname.lastname@example.orgA very important but often overshadowed metric in SaaS is gross dollar retention. Gross dollar retention measures how much of your customer revenue has remained with you a year later. Formulaically, it’s beginning ARR — downgrades — churn all divided by beginning ARR.
Gross dollar retention above 88%. Of the 11 publicly traded companies that disclosed their gross dollar retention at IPO, the lowest figure was 88% which is still very good. Generally speaking, healthy SaaaS has gross dollar retention of 80%+. Obviously, the higher gross dollar retention is, the higher net dollar retention will be.
Some firms prefer gross dollar retention. We do know some growth equity and venture funds that look to gross dollar retention more so than net dollar. Their view is that so long as you’re not losing customers, they can teach you how to upgrade those customers, whereas if gross dollar retention is low, that’s a much harder problem to solve (retaining customers).