2017 Private SaaS Company

Survey Results
8th Annual

Pacific Crest Securities is now KBCM Technology Group

KBCM Technology Group combines the technology specialist approach of Pacific Crest Securities with the expanded capabilities
and broader resources of KeyBanc Capital Markets and its parent, KeyCorp (NYSE - KEY).

October 17, 2017

FINAL
KBCM TECHNOLOGY GROUP 2017 PRIVATE SAAS COMPANY SURVEY

• This report provides an analysis of the results of a survey of private SaaS companies which KBCM Technology
Group’s software investment banking team (formerly Pacific Crest Securities) conducted in June-July 2017
– Represents the eighth such survey Pacific Crest / KBCM Technology Group has completed
– The survey results include responses from senior executives of ~400 companies
– Special thanks to our partners at Matrix Partners and the forEntrepreneurs blog for help soliciting participants and republishing
our report, as well as Intacct, which helped us solicit additional responses
– We made some important changes this year, including: (1) using annual recurring revenue (ARR) rather than GAAP revenue as
a primary gauge of size and growth; and (2) asking respondents to provide precise numbers (vs. ranges) for certain key data

• Representative statistics on the survey participants:

– $8.5MM median 2016 Ending ARR, with over 85 companies >$25MM
– Median organic growth in ARR in 2016 was 47% (37% for companies > $5MM in ARR, and 25% for companies > $25MM in ARR)
– Median employees (FTEs): 78
– Median customer count: 356
– 73% headquartered in the U.S.
– ~$21K median annual contract value (ACV), with 26% of respondents below $5K and 13% above $100K
– 41% use Field Sales, and 27% use Inside Sales as predominant mode of distribution

Our goal is to provide useful operational and financial benchmarking

data to executives and investors in SaaS companies

1
SURVEY PARTICIPANT GEOGRAPHY (HQ)

U.S. Regions
33 Northern California / Silicon Valley 63
Boston / New England 39
42 Midwest / Chicago 30

293 New York Metropolitan Area 29

7 5
Pacific Northwest 25
Southeast U.S. 23
Texas 22
11
Colorado / Utah 17
8
Southern California 16
Mid-Atlantic / DC 15
25 Other U.S. 14
39
TOTAL U.S. : 293
63 29
30 Other Locations
15 Europe 42
17
Canada 33
16 Latin America 11
Australia / New Zealand 8
22 23 Asia 7
Israel 5
TOTAL Non-U.S. : 106

TOTAL: 399

2
SURVEY PARTICIPANT SIZE DISTRIBUTION

ARR
Median = $8.5MM

Median Ratio of ARR to Revenue

2016 Ending ARR

≈ 100%
2016 GAAP Revenue

Respondents (2016 Ending ARR): 390

Respondents (Ratio of ARR to Revenue): 384

3
EMPLOYEE BASE

FTEs
Median = 78

ARR per FTE Efficiency Median

= $137K
(Excl. companies
<$5MM in 2016
Ending ARR)

Overall
Median
= $100K

Respondents (FTEs): 397

Respondents (ARR per FTE Efficiency): 389, <$500K: 25, $500K-$750K: 24, $750K-$1.25MM: 18, $1.25MM-$2.5MM: 35, $2.5MM-$5MM: 46, $5MM-$7.5MM: 35,
$7.5MM-$10MM: 26, $10MM-$15MM: 45, $15MM-$25MM: 50, $25MM-$40MM: 37, $40MM-$60MM: 14, $60MM-$75MM: 8, $75MM-$100MM: 9, >$100MM: 17
Respondents (ARR per FTE Efficiency, excluding companies <$5MM in 2016 Ending ARR): 241

4
GROWTH RATES
HOW FAST DID YOU GROW YOUR ARR IN 2016?

120%

The median growth rate

drops to 25% percent for 100%
companies with over $25 100%
million in ARR and just
one-in-five companies
with over $25 million in
ARR experienced growth
2016 Organic ARR Growth Rate

80%
rates over 50 percent.

60%
54% 54%
52%
49% Median
= 47%
40% Median(1)
31% = 37%
27%
Median(2)
22%
20% 21% = 25%
20%

0%
<$2.5MM $2.5MM - $5MM - $7.5MM - $10MM - $15MM - $25MM - $40MM - $60MM - >$75MM
$5MM $7.5MM $10MM $15MM $25MM $40MM $60MM $75MM
2016 Ending ARR
(1) Excludes respondents with <$5MM in ARR
(2) Excludes respondents with <$25MM in ARR
Respondents: Total: 361, <$2.5MM: 78, $2.5MM-$5MM: 45, $5MM-$7.5MM: 33, $7.5MM-$10MM: 26, $10MM-$15MM: 46, $15MM-$25MM: 49, $25MM-$40MM: 37,
$40MM-$60MM: 14, $60MM-$75MM: 7, >$75MM: 26

6
HOW FAST DID YOU GROW ARR ORGANICALLY IN 2016?

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Once you screen out
the smallest Median = 37%(1)
companies, the chart
resembles the right 40
side of a bell curve. 37

35
31
30

25
Number of Companies

25

20 19 19
18

15 14

10
10 9
8 8
7
5
5 4 4
3 3 3
2 2 2 2
1 1 1
0

2016 Growth in ARR (%)

(1) Including the 123 respondents with <$5MM in ARR increases the median to 47%
238 respondents

7
HOW FAST DID YOU GROW ARR ORGANICALLY IN 2016?

(SCATTER VIEW OF COMPANIES >$10MM 2016 ENDING ARR)

This year, for the first 350%+
time, participants
provided precise
values for ARR,
allowing us to
present a true size-
growth visualization.
(Note that this chart
includes only
companies over
$10MM in ARR and
collapses the scales
at the high ends for
presentation
purposes).

Median
= 31%

$150+

178 respondents

8
MEDIAN GROWTH RATE AS A FUNCTION OF CONTRACT SIZE

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

It’s difficult to draw any
conclusions regarding
whether avg. target
contract size influences
growth.

Median
= 38%

(1) Annual Contract Value (ACV): annualized monthly run rate in recurring SaaS revenues, excluding professional services, perpetual licenses and related maintenance
Respondents: Total: 189, <$5K: 43, $6K-$15K: 27, $16K-$25K: 28, $26K-$50K: 30, $51K-$100K: 30, >$101K: 31

9
MEDIAN GROWTH RATE AS A FUNCTION OF SALES STRATEGY

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

All other things being equal,

the data show no 65%
discernable advantage (as 59%
measured by success
growing) for Field-dominated 55%
vs. Inside-dominated
distribution. Interestingly,
though the data is
2016 Organic ARR Growth

somewhat sparse, Channel- 45% 41%

40%
dominant strategies show 38%
some real strength.
36% Median
35% = 38%(1)

25%

15%

5%
(2)
Field Sales Inside Sales Internet Sales (2) Channel Sales Mixed
Primary Mode of Distribution (3)

(1) Discrepancy from 37% median on slide 6 due to smaller set of respondents answering both questions
(2) Results may be skewed by small respondent sample size
(3) Primary Mode of Distribution defined by determining the greatest contributor to new sales and confirming that it is at least a 25% point higher contributor than any
other. If no mode satisfies these conditions, then it is Mixed
Respondents: Total: 219, Field Sales: 103, Inside Sales: 48, Internet Sales: 11, Channel Sales: 12, Mixed: 45

10
DISTRIBUTION STRATEGY & CAPITAL EFFICIENCY

(SIZE-GROWTH SCATTER VIEW OF COMPANIES >$10MM IN 2016 ENDING ARR)

350%+

Field Sales vs.

Inside Sales Focus
Field Sales
Inside Sales

Capital Consumed
through 2016(1)
$0MM
$50MM
$100MM
$150MM
$200MM
≥$250MM

$150+

(1) Capital consumed defined as total primary cumulative equity raised plus debt drawn minus cash on the balance sheet (adjusted for dividends / distributions)
104 respondents

11
MEDIAN GROWTH RATE AS A FUNCTION OF TARGET CUSTOMER(1)

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Companies focusing
either (1) mainly on
the high-end or (2) 45%
mainly on the mid-
and low-end (Mid- 40%
40% 38% 39%
market, SMB & Median
VSB), grew modestly
faster than mixed or 35%
= 37%
32% 32%
Enterprise / Mid-
market companies.
2016 Organic ARR Growth

30%

25%

20%

Comparison with 15%

Previous Surveys
Last year, there was minimal
correlation across these groups 10%

5%

0%
Enterprise Enterprise & Middle Market & SMB & VSB Mixed
Middle Market SMB
(1) Target Customer – At least ~67% of revenues come from designated customer base; “Mixed” defined as respondents who didn’t select at least ~67% for any
designated customer base
Note: Enterprise customers defined as primarily targeting customers with >1000 employees, Middle market as 100-999 employees, SMB as 20-100 employees, and VSB
as <20 employees
Respondents: Total: 234, Enterprise: 74, Enterprise & Middle Market: 81, Middle Market & SMB: 34, SMB & VSB: 29, Mixed: 16

12
SALES & MARKETING SPEND VS. GROWTH RATE

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Not surprisingly, the

60%
fastest growing
companies spent more
on sales & marketing. 51%
51% 50%
50% 48%
Median 2016 Sales & Marketing Spend as % of Revenue

37%
40% Median
33%
= 37%
32%
30%
30%

20%

10%
Comparison with
Previous Surveys
In line with previous years’
survey results 0%
<10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% >70%

2016 ARR Growth Rate

Respondents: Total: 205, <10%: 23, 10-20%: 31, 20-30%: 27, 30-40%: 25, 40-50%: 17, 50-60%: 17, 60-70%: 7, >70%: 58

13
GO-TO-MARKET
PRIMARY MODE OF DISTRIBUTION(1)

Smaller Companies Larger Companies

<$5MM in 2016 Ending ARR $5MM+ in 2016 Ending ARR

(1) See definition on page 10

147 and 223 respondents, respectively

15
PRIMARY MODE OF DISTRIBUTION(1) AS A FUNCTION OF
MEDIAN INITIAL CONTRACT SIZE

Analyzed by contract
value, Field Sales
dominates for
companies with
median deals over
$50K. Inside Sales
strategies are most
popular among
companies with $1K-
$25K median deal
sizes.

Comparison with Previous

Surveys
More confidence in Inside Sales
in the $1K-$25K range

Note: Initial ACV of a contract

(1) See definition on page 10
Respondents: Total: 327, <$1K: 21, $1K-$5K: 71, $6K-$15K: 53, $16K-$25K: 50, $26K-$50K: 56, $51K-$100K: 41, $101K-$250K: 24, >$251K: 11

16
DISTRIBUTION STRATEGY – ANALYSIS OF FIELD VS. INSIDE SALES IN
KEY CROSSOVER DEAL SIZE TIERS
(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Among companies $6K-$50K Median Annual Contract Size

selling $6K-$50K
Field-Dominated Inside-Dominated
average ACV, we
compared those Median
favoring Field vs. Inside 2016 Ending ARR $17MM $19MM
and found: (1) Inside 2016 Organic ARR Growth Rate 30% 47%
Sales driven
2016 Ending ARR per FTE $106K $150K
companies had higher
growth and were more
capital efficient; (2) S&M % of Revenue 37% 44%
Field Sales driven Median ACV per Customer $25K $16K
companies had lower
Average Contract Length 1.5 Years 1 Year
churn and higher net
dollar retention rates. Professional Services Attach Rate 7.2% 2.6%
Commissions for New Sales to New Accounts - Direct 10% 10%

Annual Gross Dollar Churn (1) 8% 13%

% of New ARR from Upsells & Expansions 23% 26%
Net Dollar Retention Rate (1) 104% 100%
(1)
CAC Ratio for New Customers $1.26 $1.06
(1)
Capital Consumed / ARR Ratio 1.50 1.15

(1) See definitions described later in this presentation

Respondents: Total: 62, Field-Dominated: 33, Inside-Dominated: 29

17
CAC RATIO(1): HOW MUCH DO YOU SPEND FOR $1 OF NEW ARR
FROM A NEW CUSTOMER?

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Respondents
(excluding the
smallest companies) >$3.00 10
spent a median of
$1.15 to acquire $2.01-$3.00 16
each dollar of new
ARR from a new $1.81-$2.00 12
customer.
$1.61-$1.80 14

$1.41-$1.60 22

$1.21-$1.40 19
Median ≈ $1.15
$1.01-$1.20 26

$0.81-$1.00 22

$0.51-$0.80 23

$0.25-$0.50 19
Comparison with Previous
Surveys
<$0.25 12
Similar to last year’s results
of $1.13
0 5 10 15 20 25 30

(1) CAC Ratio: Includes the fully-loaded amount spent on sales & marketing for the win, over multiple periods, if necessary
195 respondents

18
CAC & CAPITAL EFFICIENCY

(SIZE-GROWTH SCATTER VIEW OF COMPANIES >$10MM IN 2016 ENDING ARR)

CAC for a New 350%+
Customer
<$0.25
$0.25-$0.50
$0.51-$0.80
$0.81-$1.00
$1.01-$1.30
$1.31-$1.50
$1.51-$2.00
$2.01-$3.00
>$3.00

Capital Consumed
through 2016(1)
$0MM
$50MM
$100MM
$150MM
$200MM
≥$250MM
$150+

(1) Capital consumed defined as total primary cumulative equity raised plus debt drawn minus cash on the balance sheet (adjusted for dividends / distributions)
120 respondents

19
CAC RATIO ON NEW CUSTOMERS VS. UPSELLS, EXPANSIONS, AND
RENEWALS
(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

The median cost to

acquire $1 of new $1.75
$1.65
upsell ARR ($0.57) is 25th
50% of the cost to percentile
acquire $1 of ARR $1.50
from a new
customer. The cost
to acquire $1 of new
expansion ARR $1.25 $1.15
($0.30) is 26%, and Median
the cost for $1 of
renewal ARR ($0.15) $1.00 $0.97
is 13%.

75th
$0.75 percentile
$0.75
$0.57 $0.62

$0.50

$0.30 $0.36
Comparison with
Previous Surveys $0.25
$0.23 $0.15
This year's group is spending
substantially more on CAC for
upsell dollars -- last year,
upsells CAC was $0.27, or 24% $0.07 $0.06
$0.00
of new customer CAC (1) (1)
New ARR from New Customer Upsells to Existing Customer Expansions Renewals

(1) Upsell defined as selling additional products / modules / functionality to an existing customer; expansion defined as expanding sales of existing products to
existing customers
Respondents: New ARR from New Customer: 195, Upsells to Existing Customer: 123, Expansions: 112, Renewals: 132

20
CAC RATIO ON NEW CUSTOMERS AS A FUNCTION OF SIZE OF COMPANY

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Difficult to assert that $1.60

there is significant
correlation between
size of company and $1.40 $1.37
CAC ratio, although $1.27
there appears to be a $1.24
Median Ratio for New ARR from New Customers

modestly higher
tolerance among
$1.20 $1.08 $1.08 Median
larger companies to $1.04 ≈ $1.15
spend more on CAC.
$1.00

$0.80

$0.60

$0.40

$0.20

$-
$5MM-$7.5MM $7.5MM-$15MM $15MM-$30MM $30MM-$50MM $50MM-$100MM >$100MM
2016 Ending ARR

Respondents: Total: 195, $5.0MM-$7.5MM: 30, $7.5MM-$15MM: 59, $15MM-$30MM: 53, $30MM-$50MM: 21, $50MM-$100MM: 19, >$100MM: 13

21
CAC RATIO SPEND BY PRIMARY MODE OF DISTRIBUTION

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Less than $0.25 $0.25-$0.50 $0.51-$0.80 $0.81-$1.00 $1.01-$1.30
Other than Internet
$1.31-$1.50 $1.51-$2.00 $2.01-$3.00 >$3.00
and Channel Sales,
where CAC appears
significantly lower Median ≈ $1.28
(but data is sparse),
there is no significant Median ≈ $1.14
correlation between Median ≈ $1.11
go-to-market
approach and
median CAC – nor is
there a meaningful Median ≈ $0.86
difference between
the distribution of
responses.

Median ≈ $0.29

(1) (2)
Field Sales Inside Sales Internet Sales (1) Channel Sales Mixed
(1) Results may be skewed by small respondent sample size
(2) Primary Mode of Distribution defined by determining the greatest contributor to new sales and confirming that it is at least a 25% point higher contributor than any
other. If no mode satisfies these conditions, then it is Mixed
Respondents: Total: 195, Field Sales: 94, Inside Sales: 41, Internet Sales: 10, Channel Sales: 9, Mixed: 41

22
CAC RATIO SPEND AS A FUNCTION OF TARGET CUSTOMER

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Less than $0.25 $0.25-$0.50 $0.51-$0.80
Not surprisingly, the $0.81-$1.20 $1.21-$1.50 $1.51-$1.80
$1.81-$2.00 $2.01-$3.00 Over $3.00
median CAC ratio for
companies targeting
larger enterprises is
higher than that for Median ≈ $1.34
those targeting VSB,
SMB and middle Median ≈ $1.21
market companies. Median ≈ $1.16
Median ≈ $1.06

Median ≈ $0.93

Enterprise Enterprise & Middle Market & SMB SMB & VSB Mixed (1)
Middle Market
Primary Target Customer
(1) Target Customer – At least ~67% of revenues come from designated customer base; “Mixed” defined as respondents who didn’t select at least ~67% for any
designated customer base
Respondents: Total: 191, Enterprise: 58, Enterprise & Middle Market: 72, Middle Market & SMB: 25, SMB & VSB: 23, Mixed: 13

23
S&M COMPOSITION: SALES VS. MARKETING COST %

Overall, the median

Sales vs. Marketing Spend of Companies by Dominant Sales Strategy
company devotes
30% of their S&M 100%
expenses to
marketing, with the
remainder allocated 30% 29%
34% 33% 34%
to sales. However,
80%
Internet Sales-driven
companies have a
much greater
reliance on
75%
marketing at 75%. 60%

40%
70% 71%
67% 68% 66%

20%

25%
Comparison with Previous
Surveys
Results are largely consistent 0%
(1) (1) (2)
with previous years' results Overall Field Sales Inside Sales Internet Sales Channel Sales Mixed

Sales Marketing
(1) Results may be skewed by small respondent sample size
(2) Primary Mode of Distribution defined by determining the greatest contributor to new sales and confirming that it is at least a 25% point higher contributor than any
other. If no mode satisfies these conditions, then it is Mixed
Respondents: Overall: 215, Field Sales: 103, Inside Sales: 46, Internet Sales: 10, Channel Sales: 12, Mixed: 44

24
MIDDLE-THIRD DISTRIBUTION OF SALES VS. MARKETING COST %

The survey data 100% Sales vs. Marketing Spend of Companies by Dominant Sales Strategy
shows a greater
conformity in sales
vs. marketing spend
for field-sales driven
organizations than
80% S: 76% / M: 24%
for inside sales. S: 75% / M: 25% S: 75% / M: 25%
67th percentile S: 73% / M: 27%
Internet sales 71% S: 70% / M: 30%
organizations exhibit Median 67%
even greater 70% S: 69% / M: 31%
68%
diversity in balancing 33rd percentile 66%
60% S: 62% / M: 38%
sales vs. marketing S: 60% / M: 40% S: 61% / M: 39%
spend. S: 58% / M: 42%

S: 44% / M: 56%

40%

S: Sales %
25% M: Marketing %

20%
S: 20% / M: 80%

0%
Overall Field Sales Inside Sales Internet Sales (1) Channel Sales (1) Mixed (2)

(1) Results may be skewed by small respondent sample size

(2) Primary Mode of Distribution defined by determining the greatest contributor to new sales and confirming that it is at least a 25% point higher contributor than any
other. If no mode satisfies these conditions, then it is Mixed
Respondents: Overall: 215, Field Sales: 103, Inside Sales: 46, Internet Sales: 10, Channel Sales: 12, Mixed: 44

25
CAC PAYBACK PERIOD(1) (GROSS MARGIN BASIS)

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

How long does it take to recover CAC, based on gross margin subscription dollars received?

Respondents Median ≈ 18 months 22

22
reported an implied
median CAC 20
payback of ~18
months, though there
18
was a wide
distribution of
16
responses.
Number of Companies

14

12
10
10 9 9 9 9

8 7 7 7
6 6 6 6
6 5 5 5
4 4 4 4 4 4
4 3 3 3 3 3 3
2 2
2 1 1 1
Comparison with Previous
Surveys
0
Results are largely consistent
1 year CAC Payback Period 2 years ≥ 3 years
with previous years' results

(1) Implied CAC Payback Period: Defined as # of months of subscription gross profit required to recover the fully-loaded cost of acquiring a customer; calculated by
dividing self-reported CAC ratio by subscription gross margin
177 respondents

26
WHAT PERCENTAGE OF NEW ARR IS FROM UPSELLS & EXPANSIONS TO
EXISTING CUSTOMERS?

The median
respondent gets 19% of
new ARR sales from
40%
upsells and 37%
expansions; larger
companies rely more 35%
heavily (up to 2x more) 32%
% New ACV from Upsells & Expansions

on upsells and
expansions. 30% 29%

26%
24%
25%

20% 19% Median

15%
= 19%
15%

10% 9%

5%
Comparison with Previous
Surveys
0%
Similar trends to previous years <$2.5MM $2.5MM-$5MM $5MM-$7.5MM $7.5MM-$15MM $15MM-$30MM $30MM-$50MM $50MM-$75MM >$75MM
– however every group seems
to have increased focus and
success with upsells and
2016 Ending ARR
expansions – ~5% increases at
every level

Respondents: Total: 366, <$2.5MM: 105, $2.5MM-$5MM: 46, $5MM-$7.5MM: 33, $7.5MM-$15MM: 64, $15MM-$30MM: 60, $30MM-$50MM: 25, $50MM-$75MM: 10,
>$75MM: 23

27
PROFESSIONAL SERVICES ROLE IN GO-TO-MARKET

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Professional Services
Professional Services Margin
Professional services (as % of 1st year ARR)
play a minor role for
most, with the
median company >200% 3 >50% 32
booking P.S.
revenues on new 151-200% 40-50% 15
3
deals equivalent to
14% of first year 30-40% 15
subscription contract 101-150% 3
value. Median P.S. 25-30% 7 Median = 26%
margins are approx. 76-100% 7
26%. 20-25% 9
51-75% 9 10-20% 8

26-50% 21 0-10% 9

(5%)-(1%) 1
11-25% 38 Median = 14%(1)
(15%)-(5%) 10
1-10% 70 (25%)-(15%) 13

0% (no professional services) 62 < (25%) 16

Comparison with 0 20 40 60 80 0 10 20 30 40
Previous Surveys
Professional services
margins increased from
~22% in 2016 to 26%

(1) Median does not include respondents with no professional services

216 and 135 respondents, respectively

28
PROFESSIONAL SERVICES (% OF 1ST YEAR ARR) AS A FUNCTION OF
TARGET CUSTOMER
(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

As expected,
companies which are
focused mainly on
enterprise sales have 25%
higher levels of
professional 22%
services.
20%
P.S. % of 1st Year ARR

15% 13% Median

12% = 14%

10% 9%
8%

5%

Comparison with
Previous Surveys
Attach rates ticked up for 0%
Enterprise (2016 survey:
Enterprise 18%)
Enterprise Enterprise / Middle Middle Market / SMB SMB / VSB Mixed
Market

Primary Target Customer

Respondents: Total: 154, Enterprise: 60, Enterprise & Middle Market: 54, Middle Market & SMB: 18, SMB & VSB: 13, Mixed: 9 , excludes respondents indicating no
professional services

29
SUBSCRIPTION GROSS MARGIN

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

“What is your gross profit margin on just subscription / SaaS revenues?”
Median subscription
gross margins are Over 90% 22
78%.
85-90% 38

80-85% 32
Median
75-80% 34
≈ 78%
70-75% 26

65-70% 20

60-65% 10

55-60% 5

50-55% 7

Less than 50% 15

Comparison with 0 5 10 15 20 25 30 35 40
Previous Surveys
Virtually unchanged from the
2016, 2015 and 2014 results

209 respondents

30
DIRECT SALES COMMISSIONS BY SALES STRATEGY

The survey results Field Inside

did not point to a Dominated Dominated
significant difference
in direct and fully Median Direct Sales
≈ 10% ≈ 10%
loaded commissions Commission
between companies
that predominantly Median Fully-Loaded
45 ≈ 13% ≈ 12%
use a Field go-to 42 Sales Commission
market strategy 40
versus Inside Sales.
35
30
30
Number of Respondents

25
25 22
19
20
15 15 16
15 13
11 10 11
8 9
10

0
0-3% 3-6% 6-8% 8-10% 10-12% 12-15% 15%+

Sales Commission Paid to Direct Rep (as % of first year ARR)

Field Sales Inside Sales

Respondents: Total: 246, Field Sales: 144, Inside Sales: 102

31
SALES COMMISSIONS AS A FUNCTION OF MEDIAN CONTRACT SIZE

Median Direct Sales

and Fully-Loaded 16%
commission rates did
not vary significantly 14% 14%
14%
across contract sizes 13%
greater than $1K. 13% 12% 11% Fully-Loaded
12%
11% = 12%
10% 10%
Median Sales Commission

9% 9% 9%
10%
10%
9% Direct Sales
= 10%
8% 8%
7%
6%

4%

2%

0%
<$1K $1K-$5K $6K-$15K $16K-$25K $26K-$50K $51K-$100K $101K-$250K $251K-$1MM
Comparison with
Previous Surveys
Median Contract Size (ACV)
Similar to previous years’
survey, there is minimal
correlation here Direct Sales Commission Fully-Loaded Sales Commission

Respondents: Total: 297 and 288, <$1K: 15 and 16, $1K-$5K: 62 and 62, $6K-$15K: 50 and 50, $16K-$25K: 48 and 45, $26K-$50K: 52 and 50, $51K-$100K: 38 and 35,
$101K-$250K: 21 and 19, $251K-$1M: 11 and 11, respectively

32
COMMISSIONS FOR RENEWALS, UPSELLS AND MULTI-YEAR DEALS

Commissions on Additional Commission for

renewals are either
Renewals Upsells Extra Years on Initial Contract
non-existent or very
low. Upsells this year % of Respondents Paying:
command a
commission rate Median Commission Rate Median Commission Rate

·
3% 9% No Additional
nearly as high as new on Renewals(1)
on Upsells(1) 26%
Commission
customer sales.

· Nominal Kicker 29%

·
% of Respondents Not
% of Respondents Paying Full Commission 9%
Paying Any Commission 35% (2) 71%
Full Commission
on Renewals

Comparison with
Previous Surveys
The most significant change this
year was with respect to how
companies are commissioning
Upsells – with 71% of
companies this year providing
full commissions on Upsells,
versus 59% in last year's survey
results

(1) Among companies paying a commission

(2) Same rate (or higher) than new sales commissions
Respondents: Renewals: 175, Upsells: 194, Extra Years on Initial Contract: 217

33
OPERATIONAL ASPECTS
HOW IS YOUR SAAS APPLICATION DELIVERED(1)?

76% of participants use

third parties Now 3 Years from Now
predominantly (2/3 of
which is AWS);
expectations for the
future show a continuing
shift as third-party Microsoft Azure
Other Another Third-Party Microsoft Azure
Another Third-Party Other
application delivery 5% IaaS or PaaS 7%
IaaS or PaaS 4% 4%
continues to gain 6%
8% Self Managed
popularity. Servers
13%
Self Managed
Servers
24% Google Cloud
5%
Salesforce App
Cloud
3%

Google Cloud
Comparison with 2%
Previous Surveys Salesforce App
The trend toward using Amazon Web Cloud
third-party public cloud is Services (AWS) 3%
significant (mostly AWS) 53% Amazon Web
– self-managed is down Services (AWS)
from 33% last year to 24% 63%
this year

(1) Reported “predominant” mode of delivery

(2) 384 and 383 respondents, respectively

35
 SAAS APPLICATION DELIVERY METHOD AS A FUNCTION OF
SIZE OF COMPANY

100%
When filtered by
company size, 90%
smaller respondents
reported more
80%
frequent use of third-
party providers as
their primary 70%
application delivery
method, while the 60%
largest companies
were more likely to
use self-managed 50%
servers.
40%

30%

20%

10%

0%
$5MM-$10MM $10MM-$15MM $15MM-$25MM $25MM-$40MM >$40MM
2016 Ending ARR
Amazon Web Services (AWS) Google Cloud Salesforce App Cloud
Microsoft Azure Another Third-Party IaaS or PaaS Other
Self Managed Servers

Respondents: Total: 225, $5MM-$10MM: 58, $10MM-$15MM: 42, $15MM-$25MM: 47, $25MM-$40MM: 33, >$40MM: 45

36
SUBSCRIPTION GROSS MARGIN AS A FUNCTION OF
SAAS APPLICATION DELIVERY METHOD

100%
Median subscription
gross margins did
not appear to vary
significantly when
80% 75%
filtered by SaaS 80% 78% 78% 77% Median
application delivery
method (note that the 70% 70%
= 78%
Google Cloud and
Salesforce data is
2016 Subscription Gross Margin

sparse).
60%

40%

20%

0%
Amazon Web Google Cloud Salesforce App Microsoft Azure Another Third-Party Other Self Managed
Services (AWS) Cloud IaaS or PaaS Servers

Respondents: Total: 380, Amazon Web Services (AWS): 202, Google Cloud: 7, Salesforce: 11, Microsoft Azure: 19, Other Third-Party: 32, Others: 17,
Self Managed Servers: 92

37
COST STRUCTURE
COST STRUCTURE

(EXCLUDING COMPANIES <$5MM IN 2016 GAAP REVENUE)

2016 Median

Gross Margin 73%

Operating Expense Margins:

Sales & Marketing 35%
Research & Development 28%
General & Administrative 19%

EBITDA (14%)
FCF (12%)

YoY GAAP Revenue Growth Rate 33%

YoY Organic ARR Growth Rate 36%
Comparison with Previous
Surveys
Results are largely in-line with
previous results

Respondents reporting: Gross Margin: 220, Sales and Marketing: 216, R&D: 215, G&A: 216, EBITDA Margin: 201, FCF Margin: 201, GAAP Revenue Growth: 249,
Organic ARR Growth: 245

39
MEDIAN COST STRUCTURE BY SIZE

(EXCLUDING COMPANIES <$5MM IN 2016 GAAP REVENUE)

Size of Company (2016 GAAP Revenue)
$5MM - $10MM - $15MM - $25MM - $40MM -
All Respondents >$60MM
$10MM $15MM $25MM $40MM $60MM

Total Gross Margin 73% 73% 72% 76% 68% 73% 73%
Subscription 78% 76% 77% 79% 77% 78% 80%
Professional Services 27% 30% 40% 28% 20% 35% 18%

Operating Expense Margins:

Sales & Marketing 35% 33% 37% 37% 29% 24% 43%
Research & Development 28% 29% 33% 29% 24% 21% 22%
General & Administrative 19% 22% 19% 19% 18% 16% 14%

EBITDA Margin (14%) (39%) (23%) (13%) (6%) (7%) (8%)

YoY GAAP Revenue Growth Rate 33% 54% 46% 39% 24% 27% 26%
YoY Organic ARR Growth Rate 35% 57% 47% 32% 22% 27% 23%

Comparison with Previous

Surveys
Results are largely in-line with
last year’s survey, except for
Professional Services gross
margin, which was 11% last
year for all respondents
>$2.5MM, and is 27% this year
for all respondents >$5MM

Note: Numbers do not add due to the fact that medians were calculated for each metric separately and independently
Average Number of Respondents: $5MM-$10MM: 54, $10MM-$15MM: 34, $15MM-$25MM: 48, $25MM-$40MM: 30, $40MM-$60MM: 12, >$60MM: 33

40
FOR COMPARISON: HISTORICAL RESULTS OF
SELECTED PUBLIC SAAS COMPANIES
Total Revenue Run-Rate

~$25MM ~$50MM ~$100MM

Median Values

Total Gross Margin 63% 65% 67%

Sales & Marketing 52% 44% 43%

Research & Development 22% 20% 19%

General & Administrative 22% 16% 16%

EBIT Margin (34%) (22%) (18%)

Adj. EBITDA Margin (28%) (12%) (3%)

FCF Margin (29%) (17%) (7%)

(1)
YoY Revenue Growth Rate 123% 51% 36%

(1) YoY Revenue Growth compares against previous year’s revenue of the companies at the time
Note: Excludes stock-based compensation (SBC)
Median includes ALRM, AMBR, APPF, APTI, ATHN, AYX, BCOV, BL, BNFT, BOX, BV, CLDR, CNVO, COUP, COVS, CRM, CSOD, CTCT, CVT, DMAN, DWRE, ECOM, EOPN, ET, FLTX,
HUBS, LOGM, MB, MKTG, MKTO, MRIN, N, NEWR, NOW, OKTA, OPWR, PAYC, PCTY, PFPT, QLYS, RNG, RNOW, RP, RPD SFSF, SHOP, SPSC, SQI, TLEO, TWLO, TXTR, VEEV, VOCS,
WDAY, WK, XTLY and YDLE
~$25MM median excludes ALRM, APTI, ATHN, BNFT, CALD, CSLT, ECOM, COUP, CVT, EOPN, FIVN, FLTX, MKTG, MULE, OKTA, PAYC, PCTY, PFPT, QLYS, RNG, RP, ULTI, TWLO, WK
and YDLE
~$50MM median excludes ALRM, APTI, BV, BNFT, CALD, FLTX, N, RP and WDAY
~$100MM median excludes AMBR, APPF, AYX, BL, CALD, CTCT, CNVO, COUP, DMAN, DWRE, EOPN, EVBG, NOW and VEEV

41
MEASURING SURVEY PARTICIPANTS AGAINST “THE RULE OF 40%”

(EXCLUDING COMPANIES <$15MM IN 2016 ENDING ARR)

Continuing our theme from last year, we
looked at “The Rule of 40%" index of
{Growth + Profitability} for companies
>$15MM ARR. The median G+P Index
for this group was 17% or a little less
than half the so-called "Rule of 40%"
threshold.

“The Rule of
40%” line

2016 Ending ARR

$10MM Survey
$50MM Median
$100MM = 17%
$150MM
≥$200MM

Respondents: Total: 110, {G+P} > 40%: 27, {G+P} < 40%: 83

42
COMPARISON OF “THE RULE OF 40%” LEADERS VS. OTHERS

(EXCLUDING COMPANIES <$15MM IN 2016 ENDING ARR)

Rule of 40%
{G + P} > 40% {G + P} < 40%
The median results of (Medians) (Medians)
those respondents meeting
Scale / Growth / Profitability:
or exceeding “The Rule of
2016 Ending ARR (MM) $29 $33
40%” showed that while the
best G+P performers are of 2016 Organic ARR Growth Rate 62% 22%
similar size and age, they 2016 EBITDA Margin (3%) (14%)
have significantly better
churn, CAC and capital SaaS Metrics:
consumption ratios. Also, Annual Gross Dollar Churn (1) 6.3% 8.3%
more of the high Net Dollar Retention Rate (1) 104% 100%
performers comprise a
CAC Ratio for New Customers (2) $1.11 $1.29
higher percent of vertically-
focused vendors and a CAC Ratio for Upsells(2) $0.46 $0.67
(2)
higher tendency to be CAC Ratio for New Expansions $0.28 $0.26
Inside-sales driven. % of New ARR from Existing Customers 34% 29%

Business Focus / Go-To-Market:

% of Companies with a Vertical Focus 41% 23%
End Customer 22% Enterprise 29% Enterprise
Median ACV per Customer $14K $23K
Inside Sales Dominated 37% 17%
Field Sales Dominated 37% 54%

Capital / Maturity:
Capital Consumed $45MM $48MM
Capital Consumed / ARR Ratio 0.94 1.64
Years in Operation 10 years 11 years
(1) See definitions described later in this presentation
(2) See definitions described earlier in this presentation
Respondents: Total: 110, {G+P} > 40%: 27, {G+P} < 40%: 83

43
FOR COMPARISON: “THE RULE OF 40%” FOR PUBLIC SAAS COMPANIES

For comparison, public

SaaS companies’ median
growth + profitability was
34.6%. Notably, 66% of the
market cap of public SaaS
was above the 40%
threshold.

“The Rule of
40%” line
2017E GAAP Revenue
$100MM
$2,000MM Median {G + P} =
$4,000MM 34.6%
$6,000MM
$8,000MM
$10,000MM

LTM data and Enterprise Value as of 10/6/17

EV / 2017E Revenue Multiple
2017E revenue based on consensus estimates as of 10/6/17

0.0x 5.5x 15.0x 44

CONTRACTING & PRICING
MEDIAN / TYPICAL CONTRACT TERMS FOR THE GROUP

Average Contract Length Average Billing Frequency

The median average
contract length is 1.4
years; and the Median ≈ 1.4 years Median ≈ 10 months
median billing term is
ten months in
advance. 1-2+ years
1 to 2 years 3%
64%

Monthly
33%

2 to 3 years
15%

1 year
45%
3 years or
more
4%

Month to 1 year
Month 9%
Comparison with Previous
Surveys 11% Quarterly to
Less than 1
No significant change in
year 6% <1 year 9%
contract durations; somewhat
better billing terms (10 months
in advance, vs. 7 months in last
year's data)

Respondents: Average Contract Length: 349, Average Billing Frequency: 348

9.12.17v1
46
CONTRACT LENGTH AS A FUNCTION OF CONTRACT SIZE

Month to month Less than 1 year 1 to 2 years 2 to 3 years 3 years or more

The phenomenon of
100%
longer contract terms
for larger contracts is
pretty clear with the 90%
exception of a few
outliers.
80%

70%

60%

50%

40%

30%

20%

10%

Comparison with Previous

Surveys 0%
Largely similar to previous <$1K $1K-$5K $6K-$25K $26K-$100K $101K-$250K >$251K
years' results Median Contract Value (ACV)

Respondents: Total: 308, <$1K: 19, $1K-$5K: 61, $6K-$25K: 94, $26K-$100K: 94, $101K-$250K: 30, >$251K: 10

9.12.17v1
47
WHAT IS YOUR PRIMARY PRICING METRIC?

Other
17%

Seats
36%
Database Size
4%

Total Employees
9%

Sites
8%
Comparison with Previous
Surveys
Largely similar to previous Usage or
years' results
Transactions
29%
“Other” includes: Data usage, number of apps being tested, inventory volume / SKUs, customer devices and amount of content
348 respondents

9.12.17v1
48
RETENTION & CHURN

9.12.17v1
ANNUAL UNIT CHURN(1)

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

>20% 39

16%-20% 27

12.6%-15% 27

11%-12.5% 16 Median
10% 28 ≈ 11%
Annual Unit Churn Rate

9% 7

8% 4

7% 7

6% 10

5% 16

4% 10

3% 14

Comparison with Previous 2% 4

Surveys
This median increased slightly, 1% 5
by 1%, from 10% to 11%
0 5 10 15 20 25 30 35 40 45
(1) Annual Unit Churn: Percentage churn of # of paid customers at year-end 2015 that were still customers at year-end 2016
214 respondents

9.12.17v1
50
ANNUAL GROSS DOLLAR CHURN(1)

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

>35% 12

20-35% 20

15-20%
Annual Gross Dollar Churn

23

10-15% 26

7.5-10% 49 Median
≈ 8%
5-7.5% 30

3-5% 16

0-2% 30
Comparison with Previous
Surveys
0 10 20 30 40 50 60
This result is comparable to past
survey results (8% in 2016, 7%
in 2015 and 6% in 2014)

(1) Annual gross dollar churn is the % of dollar ARR under contract at the end of the prior year which was lost during the most recent year (excludes the benefits of
upsells and expansions
Respondents: Total: 206, Month to month: 18, Less than 1 year: 9,1 year: 87, 1.5 year: 33, 2 years: 16, 2.5 years: 8, 3 years: 23, 4 years: 3, 5+ years: 9

9.12.17v1
51
GROSS DOLLAR CHURN & CAPITAL EFFICIENCY

(SIZE-GROWTH SCATTER VIEW OF COMPANIES >$10MM IN 2016 ENDING ARR)

350%+

Capital Consumed
through 2016(1)
$0MM
$50MM
$100MM
$150MM
$200MM
≥$250MM
$150+

(1) Capital consumed defined as total primary cumulative equity raised plus debt drawn Annual Gross Dollar Churn
minus cash on the balance sheet (adjusted for dividends / distributions)
130 respondents
0% 8% ≥25%
9.12.17v1
52
ANNUAL GROSS DOLLAR CHURN AS A FUNCTION OF CONTRACT LENGTH

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Unsurprisingly, 20.0%
companies with longer
contracts generally 17.5%
18.0%
experience lower
gross dollar churn.
16.0%
Annual Gross Dollar Churn Rate

14.0%
12.5% 12.5%
12.0%

10.0%
8.8%
8.3%
Median
8.0%
≈ 8%
6.0%
4.0%
4.0%
2.5%
2.0% 1.3% 1.0%
Comparison with Previous
Surveys 0.0%
Largely in line with previous
Month to Less than 1 year 1.5 year 2 years 2.5 years 3 years 4 years 5+ years
results month a year
Average Contract Length

Respondents: Total: 206, Month to month: 18, Less than 1 year: 9,1 year: 87, 1.5 year: 33, 2 years: 16, 2.5 years: 8, 3 years: 23, 4 years: 3, 5+ years: 9

9.12.17v1
53
ANNUAL NON-RENEWAL RATES(1) VS. GROSS DOLLAR CHURN

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

We've broken out "non-
renewal rates" from
gross dollar churn, and 14.0%
determined that some of 12.5% 12.5%
the resulting improved
churn rates -- but not all 12.0%
-- is explained by longer
contract duration.
Annual Gross Dollar Churn Rate

10.0%
8.8%

8.0% 7.5%

6.0%
5.0%

4.0%
2.5%
2.0%
1.1%
NA
0.0%
Less than 1 year 1 to 2 years 2 to 3 years 3+ years
Average Contract Length

Non-Renewal Rate Annual Gross Dollar Churn Rate

(1) Non-Renewal Rate defined as the dollar ARR up for renewal in any period which does not renew
Respondents: Total: 206, Less than 1 year: 27, 1 to 2 years: 136, 2 to 3 years: 31, 3+ years: 12

9.12.17v1
54
ANNUAL GROSS DOLLAR CHURN AS A FUNCTION OF
UPFRONT PROFESSIONAL SERVICES
(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)
Respondents with higher 14.0%
levels of professional
services reported lower
churn and lower non- 11.7%
renewal rates. 12.0%
Annual Gross Dollar Churn Rate

10.0%

8.3% 8.3% 7.5%

8.0%
Median
≈ 8%

6.0%

4.0%

2.5% 2.8% 2.5%

2.0%

0.0%
0% (no 1-10% 11-25% 26-50% 51-75% 76-100% >100%
professional
services) Professional Services (as % of 1st year ACV)

Respondents: Total: 196, 0%: 56, 1-10%: 62, 11-25%: 36, 26-50%: 20, 51-75%: 7, 76-100%: 6, >100%: 9
9.12.17v1
55
ANNUAL GROSS DOLLAR CHURN AS A FUNCTION OF
MEDIAN CONTRACT SIZE
(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)
As contract sizes
increase, gross dollar 12.0%
churn consistently
trends downwards 10.8%
(presumably related
to longer term 10.0%
contracts).
Median Annual Gross Dollar Churn Rate

8.3%
7.5% 7.5%
8.0%
Median
≈ 8%

6.0%
5.0%

4.0%

2.0%

Comparison with
Previous Surveys
0.0%
Similar trends to last year;
however, this year we see less <$15K $16K-$25K $26K-$50K $51K-$100K >$100K
differentiation by ACV Median Contract Size (ACV)

Respondents: Total: 181, <$15K: 66, $16K-$25K: 28, $26K-$50K: 29, $51K-$100K: 30, >$100K: 28

9.12.17v1
56
ANNUAL GROSS DOLLAR CHURN AS A FUNCTION OF PRIMARY DISTRIBUTION MODE

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

30%
Those companies
employing primarily
Field Sales had 25%
lower gross dollar 25%
churn rates than
those employing
primarily Inside
Sales, Internet Sales
20%
Annual Gross Dollar Churn

or Mixed distribution.

15%
13%

10%
8% 8%
8% Median
≈ 8%
Comparison with Previous
Surveys 5%
Largely similar results to
previous years

0%
Field Sales Inside Sales Internet Sales Channel Sales Mixed / Other (1)
(1) Primary Mode of Distribution defined by determining the greatest contributor to new sales and confirming that it is at least a 25% point higher
contributor than any other. If no mode satisfies these conditions, then it is Mixed
Respondents: Total: 196, Field Sales: 91, Inside Sales: 43, Internet Sales: 9, Channel Sales: 11, Mixed / Other: 42

9.12.17v1
57
ANNUAL NET DOLLAR RETENTION FROM EXISTING CUSTOMERS

“How much do you expect your ACV from existing customers to change, including the effect
of both churn and upsells / expansions?”(1)
100%+ Net Retention
The median annual (upsells / expansions
>120% 42
net dollar retention greater than churn)
rate, including churn
and the benefit of 110-120% 42
upsells and
expansion, is 101%.
The result does not 105-110% 34
change materially
when removing the
smallest companies 100-105% 36
(<$5MM in ARR)
from the group.
~100% 57 Median
≈ 101%
95-100% 38
(Churn greater
than upsells /
expansions)
Net Churn

90-95% 18

80-90% 28

Comparison with Previous

Surveys <80% 28
Largely consistent with past two
years’ results (2016: 102%, 0 10 20 30 40 50 60
2015: 104% and 2014: 103%)

(1) We define this as the “net dollar retention rate”

323 respondents

9.12.17v1
58
CAPITAL REQUIREMENTS

9.12.17v1
CAPITAL EFFICIENCY

Time and investment required to reach selected ARR thresholds:

Median for Participants

Years Total Capital
Threshold Required Consumed (MM) (1)
$5MM ARR 4 $7.9
$10MM ARR 5 $12.3
$25MM ARR 7 $23.7
$50MM ARR 9 $41.0

We phrased our survey questions differently this year from years past, requesting true dollars consumed, rather than primary equity capital raised.
(1) Capital consumed defined as total cumulative primary equity raised plus debt drawn minus cash on the balance sheet (adjusted for dividends / distributions)
Responses: 373, $5MM ARR Threshold: 141, $10MM ARR Threshold: 146, $25MM ARR Threshold: 62, $50MM ARR Threshold: 24

9.12.17v1
60
CAPITAL CONSUMPTION RATIO(1)

(EXCLUDING COMPANIES <$5MM IN 2016 ENDING ARR)

Capital Total Cumulative Capital Consumed(1)

2.00
Consumption =
Ratio ARR Achieved
1.80 1.72
Capital Consumed 2016 Ending ARR

1.60 1.49
1.43 Median
1.40 1.35 = 1.46
1.20
0.97 0.98
1.00

0.80

0.60

0.40

0.20

0.00
$5MM to $10MM $10MM to $20MM to $30MM to $50MM to >$100MM
$20MM $30MM $50MM $100MM
2016 Ending ARR
(1) Capital consumed defined as total primary cumulative equity raised plus debt drawn minus cash on the balance sheet (adjusted for dividends / distributions)
Respondents: 206, $5MM to $10MM: 54, $10MM to $20MM: 66, $20MM to $30MM: 32, $30MM to $50MM: 24, $50MM to $100MM: 20, >$100MM: 10

9.12.17v1
61
USE OF DEBT CAPITAL AMONG PRIVATE SAAS COMPANIES

% Using Median Debt Median Debt-to-MRR

2016 ARR Range Debt(1) Availability(2) Ratio (2)

Less than $5MM 34% $1MM 5.0x MRR

$5MM to $10MM 78% $3MM 3.0x MRR

$10MM to $15MM 73% $5MM 5.0x MRR

$15MM to $25MM 77% $7MM 4.0x MRR

$25MM to $40MM 89% $10MM 5.0x MRR

Greater than $40MM 77% $17MM 3.5x MRR

We phrased our survey questions differently this year from years past, requesting true dollars consumed, rather than primary equity capital raised. The results should
make it easier for "apples-to-apples' comparisons.
(1) Of at least $1MM in debt
(2) Median among companies with at least $1MM of debt; includes debt outstanding plus availability under existing lines
Respondents: Total: 172, Less than $5MM: 34, $5MM to $10MM: 36, $10MM to $15MM: 27, $15MM to $25MM: 24, $25MM to $40MM: 24, Greater than $40MM: 27
9.12.17v1
62
ACCOUNTING POLICIES

9.12.17v1
SUBSCRIPTION REVENUE RECOGNITION POLICIES

(EXCLUDING COMPANIES <$5MM IN 2016 GAAP REVENUE)

“When do you typically begin recognizing subscription revenues on a new contract
with a new customer?”

Approximately 49% of the 100% 1% 2% 2%

respondents indicated that
they begin recognition very 12%
90% 16% 16%
soon (within a week or two) 26%
after signing new contracts. 80% 11%

70% 24% 12% A few quarters or more

32% 19% after signing
60%
A few months after
9% signing
50% 11%
7% Within a month of
signing
40%
Within a week or two of
63% signing
30%
49% Shortly after signing
44% 44%
20%

10%

0%
Whole Group 0% (no professional 0-50% >50%
services)
Professional Services Attach Rate

Respondents: Whole Group: 207, 0%: 57, 0-50%: 123, >50%: 27

9.12.17v1
64
PROFESSIONAL SERVICES REVENUE RECOGNITION POLICIES

(EXCLUDING COMPANIES <$5MM IN 2016 GAAP REVENUE)

“What is the predominant mode for recognizing professional services revenues?”
Deferred over the
The clear majority of term of the contract
respondents offering 24%
professional services
indicated that they
recognize that
revenue as the
services are
provided.
Deferred over the
expected life of the
customer
7%

As the service is
provided
69%
220 respondents

9.12.17v1
65
SALES COMMISSION COST RECOGNITION POLICIES

(EXCLUDING COMPANIES <$5MM IN 2016 GAAP REVENUE)

“How do you recognize sales commission costs (deferred or recognized upfront)?”

We also inquired as to
the recognition of sales
commission costs. We Deferred recognition
found ~3/4 of 27%
respondents indicating
that they recognize
commission costs up-
front.

Recognized upfront
73%

215 respondents

9.12.17v1
66
ACCOUNTING POLICIES ACROSS SELECTED ACCOUNTING FIRMS

(EXCLUDING COMPANIES <$5MM IN 2016 GAAP REVENUE)

Subscription Revenue Recognition Professional Services Recognition Sales Comission Recognition

Within days of Within a week or Within a month of A few months after A few quarters or As the service Deferred over Deferred over the Deferred Recognized
signing a contract two of signing signing signing more after signing is provided contract term life of customer recognition upfront

BDO 50% 0% 0% 40% 10% 78% 0% 22% 22% 78%

Deloitte 44% 11% 33% 11% 0% 73% 20% 7% 16% 84%

E&Y 56% 12% 24% 8% 0% 46% 46% 8% 29% 71%

KPMG 52% 9% 24% 9% 6% 70% 30% 0% 36% 64%

Grant Thornton 22% 11% 22% 44% 0% 80% 20% 0% 50% 50%

McGladrey 56% 0% 33% 11% 0% 67% 22% 11% 33% 67%

PwC 62% 7% 24% 7% 0% 74% 15% 11% 40% 60%

Other 41% 9% 27% 23% 1% 66% 25% 9% 19% 81%

Total 49% 9% 24% 16% 1% 69% 24% 7% 27% 73%

Respondents: Total: 212, BDO: 10, Deloitte: 18, E&Y: 25, KPMG: 33, Grant Thornton: 9, McGladrey: 9, PwC: 29, Other: 79

9.12.17v1
67
KBCM TECHNOLOGY GROUP LEADERSHIP IN SOFTWARE TRANSACTION EXECUTION

2011-2017 YTD SaaS and Software IPOs

Rank Firm Deals Value ($MM)

Corporate Finance Advisory
1 KBCM Tech Group / Pacific Crest 47 $7,055.0 April 2017 May 2017 October 2016 Not Disclosed Not Disclosed $140,000,000
2 Morgan Stanley 37 7,122.7

3 J.P. Morgan 35 6,177.9

Okta BlackLine
4 Goldman Sachs 34 5,990.8 Appian
has been acquired by has been acquired by
(OKTA) (APPN) (BL) has been acquired by
5 Raymond James 26 4,026.6
$215,050,000 $86,250,000 $168,130,000
6 Cannaccord 25 4,498.0 Initial Public Offering Initial Public Offering Initial Public Offering
Senior Co-Manager Senior Co-Manager Senior Co-Manager
7 Credit Suisse 24 3,258.6

8 JMP Securities 23 4,080.5

June 2017 March 2017 May 2017 Not Disclosed $39,000,000 Not Disclosed
9 William Blair & Co 23 3,094.2

10 Stifel Nicolaus Weisel 21 2,742.3 a portfolio company of

11 Deutsche Bank 19 3,081.2 Alteryx RealPage has been acquired by Series D financing led by
Alert Logic (AYX) (RP)
12 UBS 17 3,664.2 has received a
majority investment from
13 Barclays 17 2,601.2 $70,000,000 $144,900,000 $345,000,000
Senior Secured Credit Facility Initial Public Offering Convertible Debt Offering
14 Bank of America 15 2,221.8 Senior Co-Manager Co-Manager

15 RBC Capital Markets 15 1,772.7

16 Needham & Co 14 1,329.1 September 2016 September 2016 June 2016 $165,000,000 $100,000,000 Not Disclosed

17 Allen & Co 11 2,874.2

18 Oppenheimer & Co 9 815.1

Apptio Everbridge Twilio has been acquired by
has received an has been acquired by
19 Piper Jaffray & Co 8 1,179.3 (APTI) (EVBG) (TWLO)
investment from
20 Wells Fargo 7 1,856.3 $110,400,000 $103,500,000 $172,500,000
Initial Public Offering Initial Public Offering Initial Public Offering
21 Cowen & Co 7 1,607.6
Joint Bookrunner Senior Co-Manager Senior Co-Manager
22 Jefferies 7 1,326.1

23 Citi 7 1,299.4
June 2015 June 2015 May 2015 Not Disclosed Not Disclosed $172,500,000
24 BMO 5 879.4

25 Lazard Capital Markets 4 446.2

AppFolio MINDBODY Shopify has been acquired by has been acquired by has been acquired by
(APPF) (MB) (SHOP)

$85,560,000 $100,100,000 $150,535,000

Initial Public Offering Initial Public Offering Initial Public Offering
Cc-Manager Senior Co-Manager Co-Manager

9.12.17v1
68
DISCLOSURES

KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries,
KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC (“KBCMI”), and KeyBank National Association (“KeyBank N.A.”), are marketed.
Securities products and services are offered by KBCMI and its licensed securities representatives, who may also be employees of KeyBank N.A.
Banking products and services are offered by KeyBank N.A.
The material contained herein is based on data from sources considered to be reliable; however, KeyBanc Capital Markets does not guarantee or
warrant the accuracy or completeness of the information. This document is for informational purposes only. Neither the information nor any opinion
expressed constitutes an offer, or the solicitation of an offer, to buy or sell any security. This document may contain forward-looking statements,
which involve risk and uncertainty. Actual results may differ significantly from the forward-looking statements. This report is not intended to provide
personal investment advice and it does not take into account the specific investment objectives, financial situation and the specific needs of any
person or entity.
This communication is intended solely for the use by the recipient. The recipient agrees not to forward or copy the information to any other person
outside their organization without the express written consent of KeyBanc Capital Markets Inc.
KBCMI IS NOT A BANK OR TRUST COMPANY AND IT DOES NOT ACCEPT DEPOSITS. THE OBLIGATIONS OF KBCMI ARE NOT
OBLIGATIONS OF KEYBANK N.A. OR ANY OF ITS AFFILIATE BANKS, AND NONE OF KEYCORP’S BANKS ARE RESPONSIBLE FOR, OR
GUARANTEE, THE SECURITIES OR SECURITIES-RELATED PRODUCTS OR SERVICES SOLD, OFFERED OR RECOMMENDED BY KBCMI
OR ITS EMPLOYEES. SECURITIES AND OTHER INVESTMENT PRODUCTS SOLD, OFFERED OR RECOMMENDED BY KBCMI, IF ANY,
ARE NOT BANK DEPOSITS OR OBLIGATIONS AND ARE NOT INSURED BY THE FDIC.

If you have questions or comments, please contact David Spitz, Managing Director, KBCM Technology Group:
dspitz@key.com

9.12.17v1
69