So we’re reaching new levels of efficiency in SaaS — at least in the public markets.

The average public SaaS company now has hit $300,000 in revenue per employee or so on average.

Almost Everyone’s Gotten Radically More Efficient in SaaS

That’s a good metric to think about at scale now.

But what does it mean in practice, when you are well before the IPO stage?  🙂

Now that I have 5 investments at $200m+ ARR, and they are all basically cash-flow positive (which is necessary today), I’ve seen one clear trend in today’s new efficient world:

Just about everyone at $200m ARR now has about 700 employees or so.

In part, because unicorn rounds have evaporated in SaaS (outside of some AI outliers), everyone just has to be cash-flow positive at scale.

18-24 months ago, it was all over the place.  Unicorns and decacorns flush with cash had little incentive to be efficient.  But now, almost everyone at scale has the same incentive — they have to be cash-flow positive.

So net net that ends up being around 700 employees at $200,000,000 in ARR.

Backing into that, and scaling it down to earlier stages, and I know the maths are obvious:

  • 350 employees at $100m ARR to stay efficient, maybe 450 if have cash to invest
  • 175 employees at $50m ARR.  This starts to get tough.  Few are this efficient today.
  • 88 employees at $25m ARR.  This is pretty rare.  But probably necessary if another round isn’t coming.

Venture capital is there to bridge the gap, and let you hire more to go faster.  That’s what it’s there for, and why it exists in large part.  So well-funded startups can certainly hire more than 88 employees at $25m ARR — if they are well-funded and growing quickly.

But one way or another, in today’s world, you have to skate to 700 folks at $200m ARR.  The less well-funded you are, and importantly, the less clear it is the next round is coming — the more you need to get to $300,000 per employee, faster.

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