Even the fastest-growing software startups aren’t expanding as fast as they used to. This is partly by choice; you have to trade off growth if you want profitability, and vice versa. The yardstick for measuring startup performance has changed over the past year, but changing startup performance standards means that we need a new baseline for fast growth. VC firm OpenView argues in its fourth annual Product Benchmarks Report that as SaaS companies have pivoted away from growth-at-any-cost, we need to update the definition of ‘fast-growing’ from 100% to 75% year-on-year growth.
Based on a survey of 1,000 private software companies, the report found that 22% of software startups qualified for OpenView’s definition of ‘fast-growing,’ down from 32% last year, despite the lower growth rate needed to enter the cohort. It is not just private software startups that are finding growth harder to come by; listed SaaS companies are struggling as well. Almost all the most valuable SaaS businesses that went public since 2019 saw their net dollar retention (NDR) decline in 2023 compared to 2022.
Operational Levers for Growth
The report is much more focused on the operational levers that software companies can pull to emulate the best in class. This is obviously a top concern for founders hoping to find ways to unlock new revenue without huge investments. OpenView segmentation of the data allows companies to find the relevant metrics for their specific product experience. One of the key changes that many founders are pondering is whether they should adopt some form of product-led growth, as opposed to more traditional sales-led growth.
The changing landscape of startup growth means that we need to update our definition of ‘fast-growing.’ While growth is still important, startups are increasingly focused on profitability. OpenView Product Benchmarks Report provides valuable insights into the operational levers that software companies can pull to emulate the best in class. As the SaaS industry continues to evolve, it will be interesting to see how companies adapt to changing market conditions and new growth strategies.