SaaS

Software-as-a-Service delivers an application over the internet, hosted and maintained by the vendor and licensed to customers on a recurring basis. Customers avoid installing or maintaining infrastructure; the vendor ships updates centrally to every user at once.

Investors look closely at the quality of recurring revenue, net revenue retention, gross margin, and the relationship between what it costs to acquire a customer and what that customer is worth over time.

Revenue comes from recurring subscription fees, typically tiered by seats, usage, or feature set. In mature SaaS businesses, expansion revenue — existing customers upgrading tiers or adding seats — often outpaces new-logo revenue, which is why net revenue retention matters more than gross new sales.

• Net revenue retention — expansion minus churn within the existing base
• Gross margin — typically high, since delivery cost is largely infrastructure
• CAC payback period — months to recover acquisition spend
• ARR growth rate
• Logo churn and revenue churn, tracked separately

Net revenue retention above parity, meaning the existing base grows on its own without new sales. Acquisition cost recovered inside a year. Gross margin high enough that growth spending is a choice rather than a necessity. Churn concentrated in the smallest accounts rather than the largest.

• Self-serve — low price, no sales team, product-led adoption
• Enterprise — high contract value, long cycles, dedicated implementation
• Vertical SaaS — built around a single industry's workflow
• Usage-based — billing scales with consumption rather than seats

• What is net revenue retention, and how has it moved over eight quarters?
• How much growth comes from existing customers versus new logos?
• What does churn look like segmented by customer size?
• How long until acquisition spend is recovered?
• What happens to growth if sales and marketing spend is halved?