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Comment by pdq | Hacker News Reader

It's a software company. Since there's virtually zero cost of goods, you expect a high margin.

They are burning a large amount of cash on sales/marketing. Presumably this is forward looking, so it's probably not a big deal (ie upfront costs to get long, multi-year contracts).

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> It's a software company. Since there's virtually zero cost of goods, you expect a high margin.

Not always the case, especially if you have a large professional server component to your software (& sometimes SaaS). See, for example, Workday > http://www.sec.gov/Archives/edgar/data/1327811/0001193125123...

Gross margin is not the sole metric. However, high gross margin is not a given even at software companies.

$37M in sales/marketing to generate $47M in revenue in first 6 months of 2014. Are there metrics for Sales and Marketing expenses for a SAAS company that could be used for comparison? Seems pretty high, but maybe ok for a fast growing startup.

A rule of thumb is that $1 in sales/marketing expense should get you at least $1 in additional gross profit over the next 12 months. Depending on how much of that $47M was new revenue, it sounds like they're in decent shape on that score.

You can take a look at "Insight Ventures Periodic Tables of SaaS Sales and Marketing Metrics" [1].

- [1] http://kellblog.com/2014/01/21/insight-ventures-periodic-tab...

Thanks! That was really useful. It had several layers of depth that I can spend quite some time on digesting.

Although I don't know this for a fact, I would assume their free tier is considered part of their sales/marketing expense which may have something to do with that.

I don't know if you can draw a conclusion from those numbers alone, but it's typical for a SaaS business to measure Customer Acquisition Cost (CAC) and Lifetime Value (LTV) of the typical customer. Sales and marketing seem to be the majority of the CAC, but you can't tell the LTV from revenue numbers alone.

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