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For SaaS companies, net dollar preservation is more on investors’ radar than ever. But it shouldn’t eclipse gross dollar retention: If you don’t track both metrics, you could be fighting to add new customers to a leaky bucket. Let’s investigate. — Anna
Gross Dollar Conservation is “What Protects You in Really Challenging Times”
“Gross retention really speaks to the true stickiness and health of your customer base. It’s what protects you in really challenging times,” growth stage VC Rene Stewart said in a sponsored talk on australiabusinessblog.com Disrupt in 2021.
And yet, the co-head of Vista Equity Partners growth phase Endeavor Fund added, most VCs she spoke to “probably only care about net retention.” However, her comments were made in 2021, not 2022. Since then, “challenging times” have come upon us, making investors and founders more aware of the company’s fundamentals.
Alex and I’ve already written about the importance of net dollar preservation when efficient growth is the new holy grail. But what’s the difference with holding on to gross dollars, and how is the latter faring with most tech companies? Let’s dive in.