---
title: "Cutting R\u0026D to Grow GTM Spend : Is it Happening Across Software Companies?"
description: "Analyze how SaaS companies allocate spend between R\u0026D and sales: PLG startups invest 33% in R\u0026D vs 25% for sales-led firms. Key data trends 2017-2023."
categories: ["PLG","sales","SaaS"]
keywords: ["PLG","sales-led companies","R\u0026D spending","SaaS","software companies","Theory Ventures","Atlassian","sales and marketing","venture capital","Tomasz Tunguz"]
ai_summary: "Explore how SaaS companies are shifting R\u0026D and sales spending, revealing trends in PLG versus sales-led strategies."
date: 2022-11-02
lastmod: 2026-07-28
canonical_url: https://www.tomtunguz.com/cutting_rd_to_grow/
author: "Tomasz Tunguz"
---

During [Office Hours with Lee Kirkpatrick](https://tomtunguz.com/lee-kirkpatrick-office-hours-notes/), Lee recalled managing a startup through a downturn. The business cut R&D spend to conserve cash. By prioritizing sales & marketing, the company successfully lengthened runway to increase revenue, which eased the subsequent fundraising.

I wondered if a similar pattern existed in the public software markets. Actually, the opposite is true: software companies spend more on R&D (research & development) & less on Sales & Marketing (S&M) as a percent of revenue today than six years ago. 

I suspect it's because of PLG motions.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/hx89edqpd81ocgme1vcb.png)

R&D as a percent of revenue across all public software companies increased from 24% to 28% in the last six years.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/aeilq0jyd8kvzl1jo8ug.png)

The trend is consistent & apparent across all quartiles. 

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/a9utjx3exmemp9wri15s.png)

I categorized these companies by their primary motion: sales or product-led. Sales-led companies have oscillated around the 25% mark. 

However, PLG companies are a different story. Starting in 2017 when the data is richer, the PLG companies increased R&D spend from 27.5% to 33%.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/beutafwdxyqd2og57kln.png)

Sales & marketing costs as a percent of revenue are down across both PLG & Sales-led companies. [The sales efficiencies of the second-half of Covid](https://tomtunguz.com/sales-efficiency-through-covid/) are apparent especially in sales-led businesses. 

It's curious that sales efficiency has been declining at the same time as S&M spend as a percentage of revenue has fallen. Perhaps it implies declining growth rates across the industry, but it's worthy of closer inspection. The last three quarters show a trend reversal to increased spending, however.

There's no doubt from this data PLG companies spend more on R&D to grow. [Carilu Dietrich & I chatted about this during her office hours](https://tomtunguz.com/five-pillars-of-plg/). Atlassian followed this model to great success inspiring an increasing number of software companies to follow suit.

Because of their larger balance sheets & ability to raise capital in the public markets, public software companies spent more on R&D rather than less.