Good article. We have our friends at Bessemer to thank for how pervasive CAC is. It's a decent metric, but it isn't the whole story. I backtested a bunch of CAC data about 6-7 year ago. It is clear that higher sales and marketing spend in the prior lagging period correlates highly with growth in the current, and the more efficient you are at that spend, the healthier you are. But what I think CAC misses is the impact of R&D, especially in emerging categories. Growth correlates almost as well lagged research and development as it does with sales and marketing. Just to give some color, in the dataset, relatively fast growers (2nd quintile, 40% Y/Y growth) at the median spent 52% of their prior period's revenue on sales and marketing, and 37% on research and development. Happy to share privately if you would like.
Good article. We have our friends at Bessemer to thank for how pervasive CAC is. It's a decent metric, but it isn't the whole story. I backtested a bunch of CAC data about 6-7 year ago. It is clear that higher sales and marketing spend in the prior lagging period correlates highly with growth in the current, and the more efficient you are at that spend, the healthier you are. But what I think CAC misses is the impact of R&D, especially in emerging categories. Growth correlates almost as well lagged research and development as it does with sales and marketing. Just to give some color, in the dataset, relatively fast growers (2nd quintile, 40% Y/Y growth) at the median spent 52% of their prior period's revenue on sales and marketing, and 37% on research and development. Happy to share privately if you would like.