A very important but often overshadowed metric in SaaS is gross dollar retention. While 132 SaaS companies disclosed net dollar retention at the time they went public, only 32 disclose gross dollar retention. That data is presented below and as you can see, median gross dollar retention is 95%. This figure is clearly subject to bias as so few companies report it, but it is nonetheless extraordinary. A few observations:
Gross dollar retention above 86%. Of the publicly traded companies that disclosed their gross dollar retention at IPO, the lowest figure was 86% which is still very good. Healthy SaaaS has gross dollar retention of 80%+. Premium SaaS companies have 90%+ GDR. Obviously, the higher gross dollar retention is, the higher net dollar retention will be.
Selection bias. The fact that only 32 companies share their gross dollar retention while 132 share net dollar retention should indicate to you the data is highly subject to bias. In other words, only those companies with fantastic gross dollar retention are reporting it. Even though the median here is 95%, we continue to believe 80%+ gross dollar retention is a fine place to be so long as net dollar retention is over 100%.
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). We happen to care far more about net dollar retention, as it takes time to figure out your ideal customer and NDR reflects that focused customer, whereas GDR doesn’t isolate the ideal customer in the data nearly as well. To each his own.
Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Email the author at sammy@blossomstreetventures.com or connect on LinkedIn.
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