So Cloudflare is one of our hero Cloud / SaaS companies and even under tougher macro conditions, still grew a stunning 37% at $1.2 Billion in ARR!
But it’s getting harder for Cloudflare, just like it is for many of us. The toughest metric is new customers. While NRR remains high, new customer growth as slowed to 13%, down from 24% a year ago and 32% in 2021. That’s probably a good summary of how it is for many of us. Existing customers remain happy, and if they are doing well, will buy more. But new business is a lot tougher than 12 months ago, let alone 24:
Founder CEO Matthew Prince was refreshingly honest about what was happening in sales. And I think it’s also telling, as it summarizes what has happened all across SaaS sales in the past 24 months:
- Their top reps are still closing, and closing well — at 129% of quota. And their productivity is only down 1%. “The top 15% of our sellers have achieved 129% of quota over the last four quarters.”
- Newer reps are doing just fine, too. “27% of the top reps started in the past 18 months.” This dispels a bit of the myth that the seasoned reps are keeping all the good deals and business.
- But … 100 reps essentially sold nothing. They only contributed 4% of revenue. Yikes. But I’m seeing that at many SaaS companies today, as the best keep on selling … but many of the rest struggle in a world that is no longer order taking.
Leading public companies don’t always share this level of detail, but it’s super helpful to see. It’s not just you. The reps that you hired as order takers in 2021, even 2022 … often aren’t selling anything at all today. And the ones that know your product cold often are doing just fine.
You have to move on from the ones that can’t sell today. Yes, it is harder out there. But it’s fake capacity if they can’t sell anything other than in the best of times.
And a few other useful data points from Cloudflare:
- Overall sales cycles have lengthened 27%. Helpful to see this quantified.
- Expansion sales cycles have lengthened 50%. The upsells and upgrades are still happening, but the rush is gone.
- Pipeline generation is not slowing down, however. Cloudflare sees the slowing of its still impressive growth mainly due to longer sales cycles. Pipeline has not decreased.
- Downgrades have not increased. Upgrades have slowed down, but downgrades have not accelerated.
Thank you for the transparency Cloudflare. Very helpful to all of us to see what’s really driving things these days.
(tough image from here)