Sacks @ 01:29:12Wrong
venture
In 2023, many SaaS companies will start the year with only 80–90% of the prior year’s revenue from existing customers (due to layoffs and seat reductions), instead of the historical 120%+ net retention.
So the baseline for next year could be contraction. So instead of starting with 120% of last year's revenue, you might start with 80 or 90% because there's going to be so much churn.View on YouTube
Explanation
Industry data for 2023 show that, while SaaS expansion slowed and churn/downsells increased, the baseline did not shift to 80–90% of prior-year revenue from existing customers.
- SaaS Capital’s 2023 retention benchmarks (one of the largest private B2B SaaS surveys) report median net revenue retention (NRR) of 102% and median gross retention of 91%, unchanged from 2022. That implies the typical SaaS company still grew revenue from its existing customer base rather than shrinking it. (saas-capital.com)
- A summary of the same data notes the median NRR across all SaaS companies was 102%, with higher ACV enterprises at around 110% NRR—again consistent with modest expansion, not 10–20% contraction. (churnzero.com)
- KeyBanc/Sapphire’s multi-year private SaaS survey finds that net retention stayed above 100% through the downturn, even though it fell from 2021 peaks; what deteriorated more sharply was gross retention, which dropped to the mid‑80s in 2023 before starting to recover. (prnewswire.com)
Some weaker or SMB-focused SaaS companies did experience NRR below 100% and heavy seat reductions, but broad-based surveys show:
- Typical/median SaaS did not fall to 80–90% of prior-year revenue from existing customers.
- Net retention in 2023 remained slightly above 100% for the sector as a whole.
Because the prediction framed this level of contraction as the new baseline for “many” SaaS companies, contrasting it with the historical 120%+ NRR, it overshot the actual severity of the downturn and is best characterized as wrong.