Engineering
Series 2024
ICONIQ Growth's Engineering Series examines topics that span the state of modern-day engineering organizations, from the future of engineering and developer productivity to team structure, career paths, and engineering leadership. The series leverages exclusive data and insights from engineering leaders and engineers at enterprise software companies.
About this Series
Research and development (R&D) is increasingly emerging as a significant expenditure and crucial distinguishing factor for companies. It is also frequently the least transparent function within many organizations. Unlike in finance or sales & marketing, engineering leaders often find it a challenge to access relevant or publicly available data against which to benchmark their engineering team performance.
ICONIQ Growth's Engineering Series shares best practices and proprietary benchmarks that can help you scale operations, with a specific focus on engineering-specific metrics and challenges. Each report in the series offers in-depth responses to critical questions about various operating topics, including the future of engineering, the organizational structure of engineering teams, engineering career paths, developer productivity, and engineering leadership.
The series leverages exclusive data and insights from surveys conducted in December 2023 of 200 engineering executives (including CTOs, technical founders, and VPs of Engineering), as well as 100 engineering employees (including engineers, senior engineers, and engineering managers), at Enterprise SaaS companies. The perspectives, insights, and best practices of engineering executives in the ICONIQ Growth portfolio and wider community are also woven throughout.
Reports in this Series
The State of Engineering
The State of Engineering
The State of Engineering analyzes the state of modern-day engineering organizations in 2024. The report focuses on top-of-mind questions facing engineering leaders, including 2024 spend expectations, developer experience, DevOps maturity, the impact of AI, as well as predictions about the future of engineering.
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Text LinkEngineering Predictions for 2024 (and Beyond)
- The mandate of developer productivity: Understanding and tracking developer productivity will be essential. But the focus should be on driving team-level efficiency and improving developer experience — rather than tracking individual productivity.
- The rise of platform engineering: Building an ecosystem that allows developers to be more autonomous will mean better interfaces, enhanced integration, and streamlined workflows.
- The death of agile: The agile manifesto often does not work for modern-day SaaS engineering organizations, who must navigate unplanned work, customer needs, and technical constraints.
- The AI multiplier: Incorporating generative AI and large-language models (LLMs) into internal workflows will become table-stakes for engineering teams.
In 2024, engineering leaders’ top priorities fall across three broad categories: developer productivity and experience; the evolution and maturity of DevOps; and driving innovation and efficiency, with a focus on embedding AI.
Key Priorities for Engineering Leaders
- Based on our research, we believe developer productivity should be assessed through a holistic framework that captures business impact, performance and reliability, developer effectiveness, and culture
- A key factor to improving developer productivity and experience is the state of the underlying infrastructure and processes that power engineering teams
- Our conversations with CTOs have revealed universal questions about AI that include where to start, use cases for most impact, and early ROI
Engineering leaders are prioritizing product development, accelerating developer velocity, and improving underlying infrastructure and processes
We are keeping headcount flat in 2024, so a big focus for me this year is striking a balance between individual development goals and organization needs with a major focus on efficiency.
Building Engineering & Product Teams
Building Engineering & Product Teams
Building Engineering and Product Teams analyzes the organizational structure and composition of modern-day engineering organizations in 2024. The report focuses on headcount ratios, the sequencing of key hires, workforce arrangements, talent attrition, and more.
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Text LinkHow should the make-up of product and engineering organizations evolve as organizations scale?
- Within the R&D organization, engineering makes up ~80-90% of the total R&D headcount. Product typically comprises ~10-20% (regardless of scale)
- Software engineers make up ~40% of R&D headcount
- As companies scale past $25M in revenue, they tend to invest more heavily in full-time employees (FTEs) dedicated to infrastructure
R&D usually represent the largest portion of spend as companies scale to $25M. Once they attain critical scale, these expenses level off to around ~20-30% of revenue
How should CTOs negotiate engineering resources in a budget-constrained environment?
It's a tough problem, engineering can feel like a mysterious black box to the CEO/CFO. As the CTO, fostering discussions about engineering priorities and how that maps back to the broader goals of the organization is essential for building empathy and understanding of your resourcing needs. CTOs need to be the owner of engineering budget and understand how that maps back to business value, manage dependencies, and communicate how revenue maps back to resource allocation.
How much of the R&D budget should be allocated to people?
- R&D typically comprises the largest portion of spend as companies scale to $25M. That plateaus to ~20-30% of revenue as companies reach critical scale
- Personnel costs comprise the largest portion (usually ~70-80% of total spend)
- For CTOs, setting up a strong organizational structure and operating model is a critical point of leverage
Compensation & Incentives
Compensation & Incentives
Compensation & Incentives examines engineering salary, benefits, and career paths. The report details compensation structure for key employees in R&D organizations, with particular focus on individual contributor product and engineering roles.
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Text LinkCompany stage and geography are the primary drivers of variance in total cash compensation (TCC), while revenue growth rate and sector show less impact on cash compensation levels.
Total Cash Compensation (TCC) by Stage and Geography
- Late-stage companies tend to offer higher TCC for all R&D roles, paying a median of 29% higher relative to early-stage companies
- Employers that have the majority of their employees in 'tier 1' geographies tend to offer higher TCC for all R&D roles, paying a median of 21% higher compared to 'tier 2' geographies
Compensation & Incentives
The R&D Reporting Guide
A companion guide that presents key metrics and frameworks for engineering organizations to track and leverage for Board reporting. The report includes definitions, calculations, and frameworks for key metrics, as well as best practices and templates for best-in-class reporting.
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Text LinkR&D is increasingly becoming a bigger line item in OpEx and a key differentiator for companies. However, unlike Finance or GTM updates, we have noticed there is not a standardized approach to reporting on engineering updates and how these tie to overall business outcomes.
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This guide can be used to frame engineering updates for various forums, such as engineering quarterly reviews, annual planning, or Board updates. While the reporting structure and focus will obviously vary based on the stage each company is at, we believe consistent quarterly reporting of key engineering metrics are extremely beneficial to management, the Board of Directors, and the engineering teams themselves for any companies spending more than $10M annually on R&D.
While these metrics are intended to solicit discussion around key topics like engineering spend, headcount, and efficiency, we also believe that just having quarterly reporting will force engineering teams to be more introspective as they prepare these metrics each quarter. Rather than tracking every metric under the sun, it is more important to get into a recurring motion of looking at and understanding longitudinal data.
Through more structured and consistent reporting, we hope this guide will facilitate thoughtful conversations to build a more productive and happy engineering organization (often your most expensive asset).
Tracking Developer Productivity
At its core, software development is a team-based activity. Rather than using developer productivity metrics to evaluate individual performance, we believe engineering leaders should track and understand various factors impacting developer productivity to improve overall team performance and allow them to be a better steward for dollars spent on engineering.
This means understanding both business outcomes and the factors affecting individual developer experience, such as how feature development is contributing to overall business outcomes, the timeliness and speed of development velocity, the performance and reliability of what is being shipped, opportunities to reduce friction in the development process via tools and processes, and overall developer satisfaction.
ICONIQ Growth Framework
Leadership Analytics
Product Leadership: A Hiring Blueprint from $0M to $50M ARR
Product Leadership: A Hiring Blueprint from $0M to $50M ARR
Hiring your next Head of Product? We studied every Head of Product at 65+ SaaS companies from founding to IPO. Our first chapter, Product Leadership: A Hiring Blueprint from $0 to $50M ARR focuses on considerations for hiring a Head of Product by evaluating the influence of several key operational traits on a leader's longevity.
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Text LinkHead of Product Hiring Oveview
- When hiring your next Head of Product, CEOs should factor in their company's sector, as it significantly influences the operational traits they should prioritize. For instance, Application and Infrastructure SaaS companies assign varying degrees of importance to different Head of Product operational traits.
- Across both sectors, we examined leaders’ prior leadership experience, product ownership, technical experience, sector background to understand how these impacted leaders’ longevity within the company.
Overall, SaaS companies typically have 1-2 Heads of Product from founding to IPO. They often transition to their second Head of Product after surpassing $50M ARR, indicating the scalability of their first Head of Product.
Product Leadership: A Hiring Blueprint from $50M ARR to IPO
Product Leadership: A Hiring Blueprint from $50M ARR to IPO
Hiring your next Head of Product? We studied every Head of Product at 65+ SaaS companies from founding to IPO. Our second chapter, Product Leadership: A Hiring Blueprint from $50MARR to IPO focuses on considerations for hiring a Head of Product by evaluating the influence of several key operational traits on a leader's longevity.
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Text LinkHiring for Success
- After reaching $50M ARR, most externally hired Heads of Product have previously led product organizations.
- Specifically, most Heads of Product at this stage have led product functions at companies of comparable or larger size, which resulted in better tenure outcomes relative to those with prior Head of Product experience at <$50M ARR companies
While prioritizing prior Head of Product experience at large-scale companies can lead to longevity, hires with public company product SVP / VP experience yielded slightly better tenure outcomes.
Engineering Leadership: A Hiring Blueprint from $0 to $50M ARR
Engineering Leadership: A Hiring Blueprint from $0 to $50M ARR
We believe executive hiring is the final frontier within the modern organization that has yet to benefit from the proliferation of data. We hope this analysis, which examines the backgrounds of Engineering executives at SaaS companies from $0M to $50M ARR, serves as a north star as you build and scale your engineering organization.
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Text LinkHead of Engineering Hiring Overview
- Companies typically have 2-3 Heads of Engineering from founding to IPO, with co-founders often leading the engineering organization initially.
- Companies with 2 leaders tend to transition to an externally hired leader during the mid-growth stages ($20M - $100M ARR).
- As a company matures, more formal management systems become necessary, requiring a different skill set from the Head of Engineering.
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Hiring for Success
- One of the key operational traits we evaluated is whether having prior experience in leading entire engineering organizations is necessary.
- We found that leaders with prior Head of Engineering experience often stay 2x longer than those without this qualification.
- CEOs should prioritize leaders with prior Head of Engineering experience at private SaaS companies, particularly those from <$50M ARR companies, as they have the greatest longevity.
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Engineering Leadership: A Hiring Blueprint from $50M ARR to IPO
Engineering Leadership: A Hiring Blueprint from $50M ARR to IPO
We believe executive hiring is the final frontier within the modern organization that has yet to benefit from the proliferation of data. We hope this analysis, which examines the backgrounds of Engineering executives at SaaS companies from $50M ARR to IPO, serves as a north star as you build and scale your engineering organization.
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Text LinkHiring Overview
- As a company scales past $50M ARR, CEOs often seek to hire a Head of Engineering from outside the organization.
- However, it also becomes 2.5x more common to promote someone internally relative to <$50M ARR companies.
- This may be attributed to companies having had sufficient time to develop internal talent and assess whether an individual has the technical and leadership skills necessary to lead the engineering organization through its growth.
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One of the key operational traits we evaluated is the prevalence of leaders with prior experience in leading entire engineering organizations. Interestingly, only approximately half of the externally hired leaders have prior Head of Engineering experience. Among those with such experience, most have led engineering organizations at companies of similar size or larger.
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Notes
Unless otherwise indicated, the views expressed in this presentation are those of ICONIQ growth (“ICONIQ" or the “Firm"), are the result of proprietary research, may be subjective, and may not be relied upon in making an investment decision. Information used in this presentation was obtained from numerous sources. Certain of these companies are portfolio companies of ICONIQ Growth. ICONIQ Growth does not make any representations or warranties as to the accuracy of the information obtained from these sources. This presentation is for educational purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy any securities which will only be made pursuant to definitive offering documents and subscription agreements, including, without limitation, any investment fund or investment product referenced herein. Any reproduction or distribution of this presentation in whole or in part, or the disclosure of any of its contents, without the prior consent of ICONIQ, is prohibited. This presentation may contain forward-looking statements based on current plans, estimates and projections. The recipient of this presentation ("you") are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. The numbers, figures and case studies included in this presentation have been included for purposes of illustration only, and no assurance can be given that the actual results of ICONIQ or any of its partners and affiliates will correspond with the results contemplated in the presentation. No information is contained herein with respect to conflicts of interest, which may be significant. The portfolio companies and other parties mentioned herein may reflect a selective list of the prior investments made by ICONIQ. Certain of the economic and market information contained herein may have been obtained from published sources and/or prepared by other parties. While such sources are believed to be reliable, none of ICONIQ or any of its affiliates and partners, employees and representatives assume any responsibility for the accuracy of such information. All of the information in the presentation is presented as of the date made available to you (except as otherwise specified),and is subject to change without notice, and may not be current or may have changed(possibly materially) between the date made available to you and the date actually received or reviewed by you. ICONIQ assumes no obligation to update or otherwise revise any information, projections, forecasts or estimates contained in the presentation, including any revisions to reflect changes in economic or market conditions or other circumstances arising after the date the items were made available to you or to reflect the occurrence of unanticipated events. Numbers or amounts herein may increase or decrease as a result of currency fluctuations. For avoidance of doubt, ICONIQ is not acting as an adviser or fiduciary in any respect in connection with providing this presentation and no relationship shall arise between you and ICONIQ as a result of this presentation being made available to you. ICONIQ is a diversified financial services firm and has direct client relationships with persons that may become limited partners of ICONIQ funds. Notwithstanding that a person may be referred to herein as a "client" of the firm, no limited partner of any fund will, in its capacity as such, be a client of ICONIQ. There can be no assurance that the investments made by any ICONIQ fund will be profitable or will equal the performance of prior investments made by persons described in this presentation. These materials are provided for general information and discussion purposes only and may not be relied upon. This material may be distributed to, or directed at, only the following persons: (i) persons who have professional experience in matters relating to investments falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “FP Order”), (ii)high-net-worth entities falling within Article 49(2) of the FP Order, and (iii)any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “FPO Relevant Persons”). Persons who are not FPO Relevant Persons must not act on or rely on this material or any of its contents. Any investment or investment activity to which this material relates is available only to FPO Relevant Persons and will be engaged in only with FPO Relevant Persons. Recipients must not distribute, publish, reproduce, or disclose this material, in whole or in part, to any other person.
Copyright © 2024 ICONIQ Capital, LLC. All rights reserved.
Disclaimer
Unless otherwise indicated, the views expressed in this presentation are those of ICONIQ Growth (“ICONIQ" or the “Firm"), are the result of proprietary research, may be subjective, and may not be relied upon in making an investment decision. Information used in this presentation was obtained from numerous sources. Certain of these companies are portfolio companies of ICONIQ Growth. ICONIQ Growth does not make any representations or warranties as to the accuracy of the information obtained from these sources.
This presentation is for general information purposes only and does not constitute investment advice. This presentation must not be relied upon in connection with any investment decision. The information in this presentation is not intended to and does not constitute financial, accounting, tax, legal, investment, consulting or other professional advice or services. Nothing in this presentation is or should be construed as an offer, invitation or solicitation to engage in any investment activity or transaction, including an offer to sell or a solicitation of an offer to buy any securities which should only be made pursuant to definitive offering documents and subscription agreements, including without limitation, any investment fund or investment product referenced herein.
Any reproduction or distribution of this presentation in whole or in part, or the disclosure of any of its contents, without the prior consent of ICONIQ, is strictly unauthorized.
This presentation may contain forward-looking statements based on current plans, estimates and projections. The recipient of this presentation ("you") are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. The numbers, figures and case studies included in this presentation have been included for purposes of illustration only, and no assurance can be given that the actual results of ICONIQ or any of its partners and affiliates will correspond with the results contemplated in the presentation. No information is contained herein with respect to conflicts of interest, which may be significant. The portfolio companies and other parties mentioned herein may reflect a selective list of the prior investments made by ICONIQ.
Certain of the economic and market information contained herein may have been obtained from published sources and/or prepared by other parties. While such sources are believed to be reliable, none of ICONIQ or any of its affiliates and partners, employees and representatives assume any responsibility for the accuracy of such information.
All of the information in the presentation is presented as of the date made available to you (except as otherwise specified), and is subject to change without notice, and may not be current or may have changed (possibly materially) between the date made available to you and the date actually received or reviewed by you. ICONIQ assumes no obligation to update or otherwise revise any information, projections, forecasts or estimates contained in the presentation, including any revisions to reflect changes in economic or market conditions or other circumstances arising after the date the items were made available to you or to reflect the occurrence of unanticipated events. Numbers or amounts herein may increase or decrease as a result of currency fluctuations.