NetSuite CFO Ron Gill breaks down SaaS unit economics, highlighting that recurring revenue streams require relatively low maintenance expenditure once acquired.
“A company like NetSuite has a gross margin on recurring revenue that's 86%, so it's a very profitable annuity.”
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More from Ron Gill
PredictionNot checkable as stated
Gill: Native SaaS vendors will capture dominant market share from traditional incumbents
“I really believe that the SAS companies really are going to take over a lot of the markets. It's a much harder transition this time. It's not just, I need to build a, the, a similar solution on a new architecture. It's I've got to do that and transform the bus…”
Ron GillJan 2, 2019▶ 4:17a16z Podcast | Why SaaS Revenue is Worth More Than Traditional Software Sales
Insight
Gill: SaaS sales spending represents investments in future recurring revenue
“Fundamentally, if you're looking at the sales and marketing expense on the P and L of a SAS company, you're comparing that to the revenue this period on the P and L of the SAS company, you're comparing the wrong thing, right? You're comparing an investment tha…”
Ron GillJan 2, 2019▶ 5:55a16z Podcast | Why SaaS Revenue is Worth More Than Traditional Software Sales
Insight
Gill: Multi-year SaaS contracts provide no extra value over one-year deals
“There's no reason for me to think of a three-year deal as more valuable than a comparable one-year deal. Our retention rates are very high. We're gonna get, We're going to get the second and third year even if even if it's not locked into that initial contract…”
Ron GillJan 2, 2019▶ 22:51a16z Podcast | Why SaaS Revenue is Worth More Than Traditional Software Sales
Opinion
Gill: Wall Street's calculated billings metric for SaaS is not meaningful
“I spend a great deal of time talking to the street about why the calculated billings number is not very meaningful.”
Ron GillJan 2, 2019▶ 15:28a16z Podcast | Why SaaS Revenue is Worth More Than Traditional Software Sales
“We see a lot of acquisition, but we don't see a lot of perpetual license companies really growing solid cloud solutions in house.”
Ron GillJan 2, 2019▶ 20:46a16z Podcast | Why SaaS Revenue is Worth More Than Traditional Software Sales
Disclosure
Gill: NetSuite customer cohort value expands year-over-year despite attrition
“If you look at a company like, ah, NetSuite at a high, high retention, low churn SaaS company, and you do a cohort analysis, you'll get a, you get a year over year, ah, increase in value of the entire install base of customers. So more than a hundred percent, …”
Ron GillJan 2, 2019▶ 1:06a16z Podcast | Why SaaS Revenue is Worth More Than Traditional Software Sales
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