Article · 5 min read

The Optimal Average Customer Value for SaaS Startups

Tomasz Tunguz · tomtunguz.com, by Tomasz Tunguz Free Intermediate

Tunguz studied SaaS companies that went public and found there is no single right customer value. Large companies were built on a few big accounts (Veeva) just as much as on millions of tiny ones. It is a short, data backed answer to the worry that a handful of high value customers cannot scale.

  • Large companies have been built at every customer count, from ten to millions.
  • A small number of high value accounts is a proven public company shape.
  • Optimize for a model you can execute, not a mythical ideal contract value.
Open on tomtunguz.com ↗

The question it answers

  1. My total market looks small, but each customer is worth a lot. Can a low-count, high-value market still work?

Read with it

  1. The single best thing ever written on customer conversations. It teaches you to ask about the customer's life and past... momtestbook.com Book · ~130 pages The Mom Test Rob Fitzpatrick
  2. The essay that put 'product-market fit' into the startup vocabulary. Read it for the gut-level description of what PMF feels... pmarchive.com Essay · ~15 min read The Only Thing That Matters Marc Andreessen
  3. The permission slip to recruit users by hand, do things manually, and deliver 'insanely great' experiences to your first few... paulgraham.com Essay · ~15 min read Do Things That Don't Scale Paul Graham
  4. The reference primer on the metrics and market-sizing logic investors use, including bottom-up market sizing that keeps... a16z Article · ~15 min read 16 Startup Metrics Andreessen Horowitz (a16z)
  5. This is the classic mental model for exactly your question: how customer count trades off against deal size. Janz maps five... The Angel VC Essay · ~12 min read Five ways to build a $100 million business Christoph Janz
  6. A business built on a few big enterprise deals quietly builds a trap: if one account walks, your revenue caves. This piece... Lighter Capital Essay How SaaS Startups Can Minimize Customer Concentration Risk Lighter Capital
eChai Partner Brands The partnership →