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Growth vs. R&D: An Analysis Of How 12 Public SaaS Companies Invest Their Revenue

Analysis of 12 Public SaaS companies shows an average 49.41% of revenue is reinvested into sales and marketing.

Many of the biggest public SaaS companies today continue to invest aggressively in growth and don’t seem to slow down in the near future, even after reaching multiple billion dollars in annual revenue. Will they slow down?

I analyzed 12 public SaaS companies (here’s the link), within a mix of Cloud, MarTech, and CRM, to see where and how they invest in growth. Mainly to understand what it takes to compete for growth and market share when Adline is just slightly bigger than we are now…

For instance, Salesforce, the biggest public SaaS company in the U.S., spent a staggering $11.8 billion on sales and marketing in 2022, accounting for 44.75% of its total revenue. 

Similarly, HubSpot and Okta, two other billion-dollar companies, spent half of their revenue on growth activities.

Note: How much to spend on growth vs. development depends of course highly on where you are in the growth journey. If you don’t have a solid product-market fit yet, it’s natural to spend more on R&D until you do.

As soon as you’re getting some traction, you will want to pour gasoline on the fire and scale as aggressively as you can.

Analysis of 12 Public SaaS companies shows an average 49.41% of revenue is reinvested into sales and marketing.

As you can see in the above picture, the average public SaaS company (in this list), spent a whopping 49.41% of its revenue on sales and marketing in 2022. Growth at all costs.

The sample might not be significant enough, but it still provides a quite accurate picture of how much revenue goes into sales and marketing within the SaaS space.

A Few Key Takeaways & Growth Initiatives:

  • Salesforce: Biggest public SaaS company. Super aggressive on growth. 44.75% of revenues ($26.5B) on sales and marketing in 2022 (that is $11.8 billion spent on sales and marketing).
  • Asana: Employ a hybrid go-to-market approach, combining a self-service model with direct sales efforts. They’re heavily invested in both sales and R&D.
  • Okta: Expects to increase growth spending, with S&M being their largest operating expense category for the foreseeable future.
  • Amplitude: Big sales/marketing org (58% of all employees). Expect this to remain the largest expense category. Increased focus on Product-Led Growth.
  • Braze: Plan to dedicate significant resources to sales and marketing programs to drive new customer acquisition.
  • HubSpot: We will continue to dedicate significant resources to inbound sales and marketing programs.
  • Semrush: Sales and marketing expenses will continue to increase. Advertising expenses increased by $23.6m. 467 full-time employees and 67 contractors in S&M.
  • CloudFlare: Plan to continue to invest in sales and marketing to grow our customer base. Advertising expenses were $43.5m (2022), $36.2 m (2021), and $25.0 m (2020).
  • ServiceNow: Market & sell primarily to enterprises. Marketing consists of lead gen via referrals, advertising, trade shows, and PR.
  • Squarespace: Sales & marketing spending decreased by 5.3%. Squarespace seems to shift more spending to R&D before ramping up sales and marketing more.
  • Twilio: Perhaps the biggest S&M Org? 3,605 employees in sales and marketing. Shifting from traditional sales to digital sales, self-service, and product-led growth.

While growth is important, companies that neglect R&D risk losing out to competitors who will push product innovation boundaries and meet the increasing demand. It will be very interesting to see how these companies continue to balance growth and R&D in the future.

A more detailed breakdown of key findings (per individual company) can be found in this spreadsheet.

Any ideas or other things that might be useful to look at?

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