The ok level of SaaS burn
Of the 62 SaaS businesses that have gone public which we follow, 51 of them were not profitable at the time they went public; that’s 82%. Clearly a certain level of burn is ok so long as you’re growing, but what is that level? Can you lose $1 for every $1 of revenue? Can you lose $2? Can you lose more? The answer to that question is below.
Of the 51 unprofitable SaaS companies that have gone public, on median they burned only -$0.27 for every $1 of revenue and on average the loss was -$0.31 for every $1 of revenue. For the 11 SaaS business that have IPO’d since January 2018, the average burn was also -$0.31 for every $1 of revenue.
In summary, so long as you’re growing fast and there is a clear path to profitability, burning about $0.30 for every $1 of revenue is acceptable. Otherwise, you’re WeWork.
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