Correlation is strong. The correlation between employee count and revenue is 0.975 meaning headcount is nearly perfectly correlated with revenue for publicly traded SaaS companies. We’re not surprised to see that a correlation exists, but it is surprising to see how strong that correlation is. That could imply a few things: i) At some point, the ability of SaaS to scale is limited. Like any seasoned business, each new dollar of revenue requires a commensurate amount of sales, support, and infrastructure expense. SaaS is still a great business model, it’s just subject to limits as is any business. Revenue is not ‘free’; ii) SaaS business models are highly predictable, in other words a seasoned SaaS business will have well understood sales, support, and infrastructure costs as the business grows.
Publicly traded SaaS businesses are large. The median revenue and headcount of the 74 publicly traded SaaS businesses we monitor is $394mm and 1,492 employees.
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