      Tomasz Tunguz Blog · 2014-08-19
      · 4307d
    

Consumer vs SaaS Companies: IPO Path Efficiency Analysis

Analysis comparing 60 recent consumer and SaaS IPOs shows consumer companies achieve faster revenue growth with lower sales/marketing and R&D spending than enterprise software companies. Consumer companies spend 31% of revenue on S&M versus 52% for SaaS, yet reach over $100M revenue by year 2. The disparity stems from simpler products, more efficient sales processes, and better leverage of distribution platforms.

6 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

R&D Spend as % of Revenue

15%

average over 10 years

Consumer companies

R&D Spend as % of Revenue

22%

average over 10 years

SaaS/Enterprise companies

Sales & Marketing Spend as % of Revenue

31%

average over 10 years

Consumer companies

Sales & Marketing Spend as % of Revenue

52%

average over 10 years

SaaS/Enterprise companies

Software Share of US Venture Capital

60%

current and growing

All US VC investments

Year 2 Median Revenue

100+$M

median

Fast-growing consumer IPO companies (Zulily, Groupon, Zynga, Millennial Media)