For SaaS companies, net dollar retention is on investor radar more than ever. But it shouldn’t eclipse gross dollar retention: If you are not tracking both metrics, you could be fighting to add new customers into a leaky bucket. Let’s explore. — Anna
Gross dollar retention is “what protects you during really challenging times”
“Gross retention really speaks to the true stickiness and health of your customer base. It’s what protects you during really challenging times,” growth stage VC Rene Stewart said in a sponsored talk at TechCrunch Disrupt in 2021.
And yet, the co-head of Vista Equity Partners’ growth-stage Endeavor Fund added, most VCs she talked to “probably only care about net retention.” However, her comments were made in 2021, not 2022. “Challenging times” have come upon us since then, making investors and founders more mindful of business fundamentals.
Alex and I have already written about the importance of net dollar retention when efficient growth is the new holy grail. But how does it differ from gross dollar retention, and how has the latter been faring at most tech companies? Let’s dive in.