SaaS Company Survey Results

2010 Pacific Crest Private SaaS Company Survey Results
See final page for important disclosures
August 10, 2010
SaaS Survey Data Set

78 private SaaS company respondents Administered to CEOs and CFOs, May-June 2010 70% multi-tenant/single instance 85% with no perpetual license software at all Diverse mix:
$0-$60M+ in revenues (~$18M median) 10-400+ employees (~100 median) 10-2,000+ customers (~500 median) $100s to $100Ks avg. ACV
(2) (1)
(~$50k median)
~50% horizontal apps / ~50% vert. apps, infrastructure, etc.
(1) (2)
Annual run rate (ARR) SaaS revenues. ACV = average annual contract value.
Growth Rates
How Fast Did/Will You Grow GAAP Revenues?

Median 2009 GAAP Rev Growth 28% Median 2009 GAAP Rev Growth 28% Median 2010E GAAP Rev Growth 34% Median 2010E GAAP Rev Growth 34%
Number of Companies
Wide diversity in GAAP revenue growth rates among participants, with median of 28% growth in 2009 increasing to 34% in 2010E
30
28
25 21 20 16 15 13 19 20
10 7 5 1 0 0 0%-15% 15%-30% 30%-45% 7 4
< 0%
45%-60%
> 60%
2009 Revenue Growth
2010E Revenue Growth
How Fast Did/Will You Grow ARR Revenues?

Median 2009 ARR Growth 33% Median 2009 ARR Growth 33% Median 2010E ARR Growth 45% Median 2010E ARR Growth 45%
Number of Companies
Not surprisingly, annual run rate in the dollar value of SaaS deals under contract reveals more robust growth 33% in 2009 to 45% in 2010E
30
25
23 21
24
20 15
18
15
10 7 5 1 0 0 0%-15% 15%-30% 30%-45% 5 5
10
11
< 0%
45%-60%
> 60%
2009 ARR Growth
2010E ARR Growth
Growth Rates Vary by Company Size

As expected, smaller companies expect to grow faster than larger ones data for mid-sized companies ($15M-$25M ARR) appear to be anomalous due to lower sample size
80% 2009 GAAP Median v Revenue Growth v
62%
60% 40% 20% 0% <$5M $5M - $15M $15M - $25M ARR $25M - $40M >$40M
34% 10%
34% 23%
Median 28%
2010E GAAP Median v Revenue Growth v
80% 60% 40% 20% 0% <$5M $5M - $15M $15M - $25M ARR $25M - $40M >$40M
53%
48% 24%
47% 29%
Median 34%
Growth Rates Vary by Company Size Detail(1)
Number of Companies v
Nonetheless, detail reveals some fast growers among the larger companies 11 of 32 companies over $15M in revenue are growing 30%+ annually
0%-15% Growth
Median 62%
15%-30% Growth
Median 34%
30%-45% Growth
Median 10%
45%-60% Growth
Median 34%
> 60% Growth

Median 23%
20 18 16 14 12 10 8 6 4 2 0
3 10 3 3 4 1 1 2
7
2 1 1 2 1 5
1 1
5
5 1 <$5M $5M - $15M
4 >$40M
$15M - $25M ARR
$25M - $40M
(1)
Growth represents 2009 GAAP revenue growth.
2009 Growth as a Function of Average Contract Value
Companies with average annual contract values of $5k-$25k appear to have the largest concentration of fast growers. Other groups are more evenly split
0%-15% Growth
15%-30% Growth
30%-45% Growth
45%-60% Growth
> 60% Growth
Median 26%
Median 62%
Median 13%
Median 26%
20 18 16 14 12 10 8 6 4 2 2 2 0 <$5K ACV $5K-$25K ACV $25K-$100K ACV >$100K ACV 1 2 3

1
2 2 10 1 3
4
3 3
6
10
2009 Growth as a Function of Sales Strategy
Companies employing primarily inside sales strategies (many of whom are in the $5k$25k ACV category) have the highest concentration of very fast growers, though there are clearly pockets of success among other groups
0%-15% Growth
15%-30% Growth
30%-45% Growth
Median 53%
45%-60% Growth
> 60% Growth
35 30 25 20 15
Median 20%
Median 17%
3 3 2 11
8
3 10 5 0 Internet 3 1 3 4 4 14
4
3 Inside
Primary Mode of Distribution
Field
Analysis of the Slow Growers

Profile of Companies with <15% Growth
Majority of Revenue From:

Slower growers are more likely to sell to large enterprises and have higher average contract values than the faster growers (see following page for comparison)
Average Contract Value

>$100K 18% $1-5K 12%
Median $81k
Other 18%
$5-25K 12%
SMB 18%
Large Enterprise 64%
$25-100K 58%
Gross Churn
Median 10% >15% 11%
Customer Acquisition Cost

Median $0.72
<5% 39%
>$1.00 29%
<$0.50 33%
10-15% 39% 5-10% 11%

10
$0.75-1.00 19%
$0.50-0.75 19%
Analysis of the Fast Growers

Profile of Companies with >45% Growth
Majority of Revenue From:

Other 41% Large Enterprise 26%

>$100K 26%
Median $23k
$5-25K 57% $25-100K 17%
SMB 33%
Gross Churn
Median 8%
Customer Acquisition Cost

>$1.00 27%
Median $0.92 <$0.50 27%
>15% 24%
<5% 40%
10-15% 16% 5-10% 20%

11
$0.75-1.00 34%
$0.50-0.75 12%
Go-to-Market
12
Primary Mode of Distribution
Channel 7%
Internet 17% Field 41%
Inside 35%
Number of Companies in each group: Field = 30; Inside =25; Internet = 12; Channel = 5.
13
Mode of Selling as a Function of ACV

Field 100% 11% 90% Primary Mode of Distribution v 80% 70% 60% 50% 40% 30% 20% 10% 0% <$5k $5k-$25k $25k-$100k >$100k
Median ACV
As expected, primary mode of distribution is highly correlated with average annual contract value. Nonetheless, there are interesting exceptions and groups on the boundaries for example, Field Sales is used for a number of companies at the low end
Inside
Internet 5% 11% 21%
Channel 13% 7% 7%
71% 79% 73% 63% 14% 14%
11%
Number of Companies in each group: <$5k = 7; $5k-$25k = 19; $25k-$100k = 19; >$100k = 15.
14
How Does Field Sales Perform for ACV of $25K-$100K?

The group with $25k-$100k ACV is an interesting boundary group. Companies employing Field Sales here tend to have lower growth and higher customer acquisition costs
Median Size (ARR)

$20M $15M
Median 2009 Growth

25% 20%
$18M
23%
$10M
$10M
15%
10%
10% 5% 0% Field Other Field Other
$5M $0M
Median Cost of $1 New ACV

$1.50 $1.25 $1.00 $0.75 $0.50 $0.25 $0.00 Field Other 12%
Median Gross Churn 11% 8%
$1.15
10% 8%
$0.63
6% 4% 2% 0% Field Other
15
How Much Do You Spend for $1 of New ACV?
Customer acquisition cost metrics, with a median of $0.73, implying a Magic Number over 1.0, appear to be abnormally low. Nonetheless, trends are still directionally interesting
>$2.00
3%
$1.00-$2.00
24%
$0.75-$1.00
22%
Median $0.73
$0.50-$0.75
16%
<$0.50
35%
0% 5% 10% 15% 20% 25% 30% 35% 40%
% of Companies
Number of Companies in each group: <$0.50 = 24; $0.50-0.75 = 11; $0.75-$1.00 = 15; $1.00-2.00 = 16; >$1.00 = 2.
16
Amount Spent for $1 ACV by Mode of Distribution
Spend per $1 ACV v
Customer acquisition costs appear to be highest for Inside Sales, and lowest for Internet. Much broader set of customer acquisition cost ratios for Field Sales
<$0.50
$0.50-$0.75
$0.75-$1.00
Median $0.89
$1.00-$2.00
>$2.00
Median $0.43
Median $0.65
100% 17% 29% 80% 8% 17% 60% 38% 40% 58% 20% 21% 0% Internet Inside Primary Mode of Distribution 13%
7% 22% 11% 22%
37%
Field
Number of Companies in each group: Internet = 12; Inside =24; Field = 27.
17
Cost Structure
18
Median Cost Structure(1)
Cost structures vary by company size, as expected
All Companies Gross Margin Op. Expense Margins: Sales & Marketing R&D G&A Op. Profit Margin
No. of Companies
ARR <$5M 84% $5M-$15M 75% $15M-$25M 70% $25M-$40M 70% >$40M 72%
73%
33% 23% 16% 1%

64
42% 23% 18% 1%

17
37% 31% 19% (12%)

16
31% 16% 11% 12%

8
26% 20% 14% 10%

13
25% 20% 12% 15%

10
(1)
Based on 2010 estimates.
19
Anticipated Cost Structure at Scale
Sources of cost improvements / operating leverage are expected to be derived across the board
2010E Median(1)
Gross Margin Operating Expense Margins: Sales & Marketing R&D G&A Op. Profit Margin
Target Model 77%
73%
33% 23% 16% 1% 0% 3% 34%
27% 17% 12% 21% 18% 18% 30%
EBITDA FCF Growth Rate
(1)
Note: Survey describes scale as "e.g.", $50 million in revenues or higher."
20
Comparison: Historical Results of Selected Public Companies

Median Run-Rate
Put in context with historical operating models of the public SaaS players, the survey group is spending a lot less on sales and marketing than their public peers did when they were private and smaller
~$25M Gross Margin 72%
~$50M 68%
~$100M 70%
Sales & Marketing
60%
47%
46%
Research & Dev.
23%
19%
12%
General & Admin.
15%
15%
17%
EBIT Margin
(26%)
(17%)
(1%)
FCF Margin
(13%)
(4%)
5%
Median includes ATHN, CNQR, CTCT, DMAN, KNXA, LOGM, N, OMTR, RNOW, SLRY, CRM, SFSF, TLEO and VOCS. ~$25M median excludes ATHN, CNQR and RNOW. ~$100M median excludes DMAN, LOGM, SLRY and VOCS.
21
Sales & Marketing Spend vs. Projected Growth Rate
Median Sales & Marketing Spend
As expected, faster growing companies are spending more on sales and marketing as a percentage of revenues than their slower growing peers
45% v
41%
40%
37% 35%
Median
(1)
35% 30% 25% 20% 15% 10% 5% 0%
33%
27%
28%
0% to 15%
15% to 30%
30% to 45% 2010E Growth Rate
45% to 60%
>60%
(1)
Bar reflects median sales and marketing spend across all companies.
22
Contracting, Pricing, Renewals
23
Median/Typical Contracts for the Group

ACV: ~$50K
Initial Contract Length

<1 Yr. 15% 2 Yrs.+ 35%
Yr. Upfront 46%
Billing Terms
>1 Yr. 5% Monthly 31%
1 Yr. 50%
Qrtly to <1 Yr. 18%
Churn:
Gross: ~8% Net (incl. up-sells): ~2%
24
Contract Length as a Function of Contract Size
As expected, contract length is highly correlated with average annual contract value
Month to month 100% 90% Average Contract Length v 80% 70% 60% 50% 40% 30% 20% 10% 0% <$5k 29% 29% 29% 14%
Less than 1 year 5% 11%
1 year 5% 25%
2 to 3 years
3 years or more
29% 50% 14%
84%
60%
43% 38%
10% $5k-$25k $25k-$100k Median ACV
14% $100k-$250k
13% >$250k
Number of Companies in each group: <$5k = 7; $5k-$25k = 19; $25k-$100k = 20; $100k-$250k = 7; $250k = 8.
25
Payment Terms as a Function of Contract Size
Typical Payment Terms v
Payment terms have less correlation with ACV. A fairly large percentage of companies with high ACVs have monthly payment terms
Monthly 100% 90% 80% 70% 60% 14% 14%
Quarterly 11%
Qtrly-1 Yr. 5%
Year in Advance
>1 Yr in Advance
29% 50% 14% 68%
25%
13%
50% 40% 30% 20% 10% 0% <$5k 16% 5% $5k-$25k $25k-$100k Median ACV $100k-$250k >$250k 20% 71% 10% 15% 57% 63%
Number of Companies in each group: <$5k = 7; $5k-$25k = 19; $25k-$100k = 20; $100k-$250k = 7; $250k = 8.
26
What is Your Primary Pricing Metric?
Seat count represents the most frequently used metric for pricing, though it accounts for just 50%
Other 11% DB size 3% Sites 3% Employees 11% Seats 50%
Usage/ Transactions 22%
Number of Companies in each group: Seats = 30; Usage = 13; Employees = 7; Sites = 2; DB size = 2; Other = 7.
27
Churn as a Function of Contract Size
Median Gross Churn
Median churn statistics appear overly optimistic, though again provide interesting relative and directional data
12%
11% 10% 10%
10%
(1)
8%
Median 8%
6%
4%
4%
3%
2%
0% <$5k $5k-$25k $25k-$100k $100k-$250k >$250k
(1)
Gross churn is on a dollar basis and does not include the benefit of upsells.
28
Churn as a Function of Contract Size Detail
No. of Companies with Annual Gross Churn of: <5% 5-10% 10-15% 15-20% 20-30% >30% Median Gross Churn Median Net Churn(1) # Unit Churn
No. of Companies
Total Group
Average Contract Value <$5k $5k-$25k $25k-$100k $100k-$250k >$250k
22 11 13 3 8 2 8% 2% 3%
61
1 2 1 0 1 1 10% 7% 7%
7
6 2 6 1 2 1 11% 3% 9%
19
5 5 6 1 3 0 10% <0% 8%
20
4 1 0 1 1 0 3% <0% 4%
7
6 1 0 0 1 0 1% <0% 2%
8
(1)
Net churn includes the benefit of upsells.
29
Churn as a Function of Primary Distribution Mode
Field Sales appears to have the lowest churn; Internet and Inside, the highest
12%
11% 10%
10% Median Gross Churn

Median 8%
8%
6%
5% 4%
4%
2%
0% Channel Internet Inside Field Distribution Mode
30
Capital Efficiency
31
Capital Efficiency Median Levels for the Group
The median company in the group needed or expects to require $24M in capital and 7.5 years to grow to $40M ARR, and became or expects to be cash flow positive when it reaches (or reached) $18M in ARR
Actual/expected time and investment reqd to reach:

Years $1M ARR $5M ARR $15M ARR $40M ARR 1.75 3.25 5.00 7.50 Investment $5M $9M $17M $24M
ARR at which you expect to be FCF+: ~$18M
32
Additional Funding Required as a Function of ARR
Additional Funding Required (# of Co's) v
As expected, most larger companies do not require more capital. Surprisingly, a number of smaller companies also dont expect to require much, if any, either
No Funding Req'd 18 16 14 6 12 10 8 6 4 2 0 <$5m 5 3 5 5 1 1
$1-$10M Req'd
$10-$20M Req'd
>$20M Req'd
3 4 4 1 9 5 6 1
$5-$15M
$15-$25M Current ARR
$25-$40M
>$40M
33
Analysis of Non-Funders
Additional Funding Required (# of Co's) v
Crossreferencing with growth suggests different attitudes regarding the need to fund growth
No Funding Req'd 18 16 14 6 12 10 8 6 4 2 0 <$5m 5

1 shrank 3 grew <15% 1 grew 30-40%
$1-$10M Req'd
$10-$20M Req'd
>$20M Req'd
1 3 4 1 4 5 1
3 grew 0-15% 1 grew 45-60% 1 grew >60% 3 grew 0-15% 4 grew 15-30% 1 grew 45-60% 1 grew >60%
2 grew 15-30% 1 grew 30-45%
3 grew 0-15% 1 grew 15-30% 1 grew 45-60% 1 grew >60%
$5-$15M
$15-$25M Current ARR
$25-$40M
>$40M
34
Additional Funding Required as a Function of $ Raised
No Funding Req'd 18 Additional Funding Required (# of Co's) v 16 14 12 10 8 6 4 6 2 0 <$5M 5 1 2 7 1 3
$1-$10M Req'd
$10-$20M Req'd
>$20M Req'd
1 2
3 7 3 $5-$15M $15-$25M Money Raised So Far $25M-$50M
>$50M
35
Exits
36
Expected Exit Scenarios
% of Respondents Deeming Scenario Likely/Highly Likely
63% of respondents believe the M&A exit is likely or highly likely; 22% believe the IPO exit is
70%
63%
60% 50%
40%
30%
22%
20% 10%
0% Exit by M&A Exit by IPO
37
Expected Exit Scenarios by Size of Company

Exit by M&A
90% % of Respondents Deeming Scenario Likely/Highly Likely 80% 70% 60% 50% 40% 30% 20% 12% 10% 0% 0% <$5M $5-$15M $15-$25M $25-$40M >$40M 13% 82% 76% 70% 63% 58%
3 likely 1 highly likely
Exit by IPO
6 likely 1 highly likely
33%
11%
Size of Company (ARR)

Number of Companies in each group: <$5M = 17; $5-$15M = 17; $15-$25M = 8; $25-$40M = 12; >$40M = 10.
38
Expectations Regarding Most and Least Likely Buyers
Wide variety of opinions regarding the likely buyers in an M&A scenario
Most Likely Buyer

40% 31% 28%
Least Likely Buyer
26% 17%
20% % of Respondents Assessment of Likely Buyer
0% Larger SaaS Co. -11% -20% Trad'l License Co. -13% Domain Expert -13% Financial Buyer
-40%
-60% -62% -80% Type of Buyer
39
Profiles of Groups with Different Buyer Expectations

Respondents who believe that the most likely M&A buyer is a larger SaaS player were typically smaller, horizontal SaaS players; those who viewed financial buyers most likely were larger and much more profitable
Rated SaaS Player #1 Buyer(1)

(Medians)
Overall Group
ARR % with Horizontal SaaS Solution % with SMBs and VSBs Comprising Majority of Revenues
$10M 75% 58%
$15M 55% 44%
(1) 20 respondents rated SaaS companies their most likely potential buyers.
Rated Financial Player #1 Buyer(2)

(Medians)
Overall Group
Revenues 2010E Growth 2010E EBITDA
$26M 38% 10%
$15M 38% 0%
(2) 11 respondents rated financial players their most likely potential buyers.
40
Expectations Regarding M&A Purchases
% of Respondents Likely/Highly Likely to v Complete Acquisition in Next 12 Months v
Over one-third of respondents expect to pursue buyside M&A over the next 12 months, with 8% looking to do larger transactions
35%
30% 25%
30%
20%
15%
10% 5%
8%
0% Small Tuck-in Larger Acquisition
41
Pacific Crest Leadership in SaaS Selected Transaction Experience

$108,000,000 $295,000,000 Undisclosed Undisclosed
has been acquired by
has been acquired by has been acquired by has been acquired by
$135,300,000
$143,000,000
$53,123,733
$75,000,000
Filed: 3/26/10
$213,900,000
RealPage (RP) Co-Manager Initial Public Offering
IntraLinks (IL) Co-Manager Initial Public Offering
Convio (CNVO) Co-Manager Initial Public Offering
SciQuest (SQI) Co-Manager Initial Public Offering
SuccessFactors (SFSF) Co-Manager Follow-On Offering
$86,250,000
Withdrawn
$124,085,000
$66,000,000
$94,875,000
$68,827,500
ExactTarget (EXTG) Co-Manager Initial Public Offering
SuccessFactors (SFSF) Co-Manager Initial Public Offering
DemandTec (DMAN) Co-Manager Initial Public Offering
Phase Forward (PFWD) Co-Manager Follow-On Offering
Salary.com (SLRY) Co-Manager Initial Public Offering
42
Questions or Comments?
David E. Director Managing Spitz
David E. Spitz
Managing Director Investment Banking Investment Banking
100 Spear Street Suit 800 San Francisco, CA 94105 Tel: 415.442.5191 Cell: 415.308.3383 Fax: 415.947.0862 dspitz@pacificdspitz@pacific-crest.com
About Pacific Crest: Pacific Crest is the leading full-service investment bank exclusively focused on the technology sector. Our top-ranked research group provides thorough coverage of technology industry trends and stocks, and our sales & trading operation is second to none as a go-to resource for institutional tech investors. Pacific Crest's investment banking group complements research, sales & trading with premier advisory and underwriting services to technology companies and investors worldwide. In particular, our software practice is extremely active, advising on many of the landmark transactions in the industry, including public offerings for SuccessFactors, Vocus, and PhaseForward; and M&A transactions with Gomez and Salesforce.com, among others. For more information, see www.pacific-crest.com. Important Disclosures: This document has been prepared by Pacific Crest Securities. Information contained herein has been obtained from sources believed to be reliable, but the accuracy and completeness of the information, and that of the opinions based thereon, are not guaranteed. This document is for information purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. Pacific Crest Securities and entities and persons associated with it, including its analysts, may have long or short positions or effect transactions in the securities of companies mentioned in this report, and may increase or decrease such holdings without notice. Pacific Crest Securities may make a market in the shares of any such company. These markets may be changed at anytime without notice. Pacific Crest Securities may have acted as lead or co-managing underwriter in ore or more of such companys U.S. equity offerings, and it may perform or seek to perform other investment banking services for any company referenced in this document.
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2010 Pacific Crest Private SaaS Company Survey Results

See final page for important disclosures

August 10, 2010

2010 Pacific Crest Private SaaS Company Survey Results

SaaS Survey Data Set

~50% horizontal apps / ~50% vert. apps, infrastructure, etc.

2010 Pacific Crest Private SaaS Company Survey Results

2010 Pacific Crest Private SaaS Company Survey Results

How Fast Did/Will You Grow GAAP Revenues?

10 7 5 1 0 0 0%-15% 15%-30% 30%-45% 7 4

2009 Revenue Growth

2010E Revenue Growth

2010 Pacific Crest Private SaaS Company Survey Results

How Fast Did/Will You Grow ARR Revenues?

10 7 5 1 0 0 0%-15% 15%-30% 30%-45% 5 5

2009 ARR Growth

2010E ARR Growth

2010 Pacific Crest Private SaaS Company Survey Results

Growth Rates Vary by Company Size

80% 2009 GAAP Median v Revenue Growth v

2010E GAAP Median v Revenue Growth v

2010 Pacific Crest Private SaaS Company Survey Results

Growth Rates Vary by Company Size Detail(1)

> 60% Growth

5 1 <$5M $5M - $15M

$15M - $25M ARR

Growth represents 2009 GAAP revenue growth.

2010 Pacific Crest Private SaaS Company Survey Results

2009 Growth as a Function of Average Contract Value

> 60% Growth

20 18 16 14 12 10 8 6 4 2 2 2 0 <$5K ACV $5K-$25K ACV $25K-$100K ACV >$100K ACV 1 2 3

2010 Pacific Crest Private SaaS Company Survey Results

2009 Growth as a Function of Sales Strategy

> 60% Growth

2010 Pacific Crest Private SaaS Company Survey Results

Analysis of the Slow Growers

Majority of Revenue From:

Average Contract Value

Large Enterprise 64%

Customer Acquisition Cost

10-15% 39% 5-10% 11%

2010 Pacific Crest Private SaaS Company Survey Results

Analysis of the Fast Growers

Majority of Revenue From:

Average Contract Value

$5-25K 57% $25-100K 17%

Customer Acquisition Cost

10-15% 16% 5-10% 20%

2010 Pacific Crest Private SaaS Company Survey Results

2010 Pacific Crest Private SaaS Company Survey Results

Primary Mode of Distribution

Internet 17% Field 41%

2010 Pacific Crest Private SaaS Company Survey Results

Mode of Selling as a Function of ACV

Internet 5% 11% 21%

71% 79% 73% 63% 14% 14%

2010 Pacific Crest Private SaaS Company Survey Results

How Does Field Sales Perform for ACV of $25K-$100K?

Median Size (ARR)

Median 2009 Growth

Median Cost of $1 New ACV

Median Gross Churn 11% 8%

2010 Pacific Crest Private SaaS Company Survey Results

How Much Do You Spend for $1 of New ACV?