---
title: "Why Lifetime Value is Relevant Again in Software"
description: "Discover why lifetime value metrics matter again in SaaS: New data shows 5% NDR drops and 44-month payback periods reshaping growth strategies in 2024."
categories: ["financials"]
keywords: ["lifetime value","SaaS metrics","venture capital","payback periods","net dollar retention","publicly traded companies","customer lifetime value","Theory Ventures","Tomasz Tunguz"]
ai_summary: "This post explains why Lifetime Value is crucial for public SaaS companies in 2024, given the challenging financial landscape."
date: 2024-10-15
lastmod: 2026-07-31
canonical_url: https://www.tomtunguz.com/why-ltv-matters-more-in-2024/
author: "Tomasz Tunguz"
---

Budget cuts followed interest rate hikes in 2022. By late 2023, more than a year of financial scrutiny had challenged many publicly traded software companies. 

However, 2024 has been a tough year again. 

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/umcv77rdd4bfvquvluzi.png)

Net dollar retention for publicly traded software companies fell from 113% on average to 108%, a five percentage point drop.<sup>1</sup> 80% of publicly traded companies saw their NDR wilt again in 2024. Overall account expansion remains roughly 5 percentage points above inflation.


![image](https://res.cloudinary.com/dzawgnnlr/image/upload/fb4rnqigvojeubqabtaf.png)

There's a similar story in payback periods. The average publicly traded company saw paybacks increase by 9 months from 35 months to 44 months. That means most software companies aren't achieving positive contribution margin until the fourth year of a customer. Again, 80% of companies saw paybacks worsen.<sup>2</sup>


I'm not a fan of lifetime value (LTV) in startups (how can one predict a 7 year customer lifetime value if the company isn't yet 7 years old?) But for public software companies with these sparser economics, LTV becomes an important determinant of whether & when to invest more in growth.

If paybacks are 4.5 years & LTVs are five years, that data should provoke strategic questions about the company operations.








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<sup>1</sup>T-test p value of 3.087e-06       
<sup>2</sup>T-test p value of 0.0002297      
<sup>3</sup>Data source is Jamin Ball's [Clouded Judgement](https://cloudedjudgement.substack.com/p/clouded-judgement-101124-budget-flush)