Snowflake: How a Revenue Retention Behemoth was Built

TL;DR

This is the second post on a deep dive in GTM metrics with a focus today on Revenue Retention
Snowflake is a software Dracula. It latches onto its customers and drains their bank accounts dry, but their victims are happy throughout the process. They are a world-class company at “net revenue retention”—a crucial metric for SaaS businesses that describes the tendency for customers to increase their spend over time.
NRR is important for enterprise SaaS companies because there are a limited number of customers that have the problem they are trying to solve, so the business can flatline quickly unless they find a way to grow revenue through their existing customer base.
Most companies have 1-2 reasons why their NRR is good. Snowflake has 6.

Hi all! This is Part 2 of our Summer of Sales series, where I’m examining the strategies, metrics, and analyses that businesses use to optimize their go-to-market! Today, I’m using stock market darling Snowflake to explore my favorite metric in all of business—Net Revenue Retention. Yes, I have a favorite metric. What, you don’t? If you only got ONE metric to evaluate a business, NRR should be it, and we can learn a lot from Snowflake’s mastery of it. A lot of how Snowflake operates is misunderstood or just unknown to the general public, so for research I interviewed multiple users of the software, data engineers, and software investors. We’ll start off with a quick definition of revenue retention, talk about how the stock market treats top performers, and then dive into why Snowflake is so, so good.

Revenue Retention’s Definition and Grace

One of the most harrowing experiences at a startup is running out of potential customers to talk to. Picture it: Over the course of six months, you watch helplessly as your leads pipeline slowly dries up. The best account executives leave immediately. The oblivious ones stick around and complain that marketing isn’t pulling their weight. Over on the demand generation team, there is blood in the streets as the cost per lead skyrockets. A VP of some revenue adjacent function is probably fired (even though it isn’t their fault). A thick fog of missed quotas and depressed workers descends on the company. These worries result in a death spiral where all the good talent in the company leaves for companies whose names rhyme with Foogle or Gacebook.