Neeraj Agrawal has an interesting article up titled The SaaS Adventure where he talks about the seven phases of go-to-market success for Software-as-a-Service (SaaS) companies that have gone public recently:
- Phase 1: Establish a great product-market fit.
- Phase 2: Get to $2 million in ARR (annual recurring revenue).
- Phase 3: Triple to $6 million in ARR.
- Phase 4: Triple to $18 million.
- Phase 5: Double to $36 million in ARR.
- Phase 6: Double to $72 million.
- Phase 7: Double to $144 million.
Of course, there’s much more nuance to startup success than hitting certain revenue targets (see 4 Startup Stages in 8 Words for the briefest example possible). Combine this with the Law of Large Numbers and Startup Growth and you can appreciate just how difficult it is to achieve that level of revenue growth and scale. See the Notes from the Marketo S-1 Filing to understand that the capital required to achieve the size and scale in that period of time resulted in investors owning 85.5% of the business, which is fine as long as that level of success is attained.
The next time an investor asks about revenue goals, tell them about tripling two years in a row and then doubling revenue year after year beyond that so as to go public in 6-7 years.
What else? What are some other thoughts on the revenue growth pattern of recent SaaS companies that have gone public?