The Rise of ‘Retention Rates,’ the Software Metric Investors Are Obsessing Over

When database startup Snowflake filed for an initial public offering in late August, investors honed in on one measure of its performance: net revenue retention rate, which reflects a company’s ability to keep customers and get them to increase their spending over time.

The figure may have become the most important metric no one has heard of outside software and finance circles. Its prominence within the sector helps explain why Snowflake—with one of the highest net revenue retention rates in its field—now has a market capitalization of around $67 billion. Snowflake’s most recent retention figure of 158% exceeded that of all seven companies in the chart above, which shows how the rate has fluctuated for Twilio, Slack and other subscription software businesses over the last 18 months.