Path to $100m of Top 140 SaaS Unicorn Businesses: “How Quickly Does a Startup Have to Grow?”

In the previous article, “Storytelling Framework for SaaS Metrics”, I pointed out ‘Year-over-year ARR Growth Rate’ is the first important indicator of SaaS Startups. According to McKinsey & Company, maintaining a high ARR growth rate, especially as a startup scales after the product-market fit, is a key factor leading to continued the successful revenue growth beyond unicorn status (more than $1Bn in corporate value).

‘Building the next unicorn SaaS company’, McKinsey Fuel Practice

Then you should ask the next question.

“How quickly does a startup have to grow?”

At the beginning of Sendbird in 2015, “triple, triple, double, double, double” (T2D3 for short) trended as a dominant concept representing the annual sales growth rate of a hyper-scaling startup. It described that belief that after the company has verified the initial product-market fit, it should be able to maintain the growth rate of T2D3 for the next 5 years from the point of $2~5m ARR (Annual Recurring Revenue) to reach the status of pre-IPO or IPO.

Today in the year of 2020, I have analyzed the annual ARR growth rate of 72 companies most successful SaaS companies in 2020 to understand their path to the symbolic milestone of $100m ARR. For this analysis, I had to integrate information from multiple trusted sources to complete list of 140 SaaS businesses first by their valuation, and I analyzed the financial data of 72 companies that their revenue information was publicly available. Because of the variety of sources, there is no guarantee that this information is devoid of mistakes, so if there is anything that needs to be corrected, please provide feedback through comments or email (mark@kimchihill.com).

The full list of 142 companies are placed at the end of this article (valuation in USD $ Bn)

Years to reach the first $10M ARR

According to the list, it showed that it takes an average of 4.5 years to reach 10M in ARR. Although it is not accurately expressed in the data (and also there were only handful of companies available for their full ARR trajectories up to $10M ARR), it appears that it took about two years to release the first product after the foundation, and then the momentum of reaching $10M ARR occurred in the two years afterwards. What you can see here is that the products and startups will have to endure the hardship of “death valley” at least over a period of about five years before starting to follow the meaningful growth trajectory.

Path to $100M ARR: 10-year long journey

As a result of analyzing the data of 72 companies that achieved the $ 100m ARR, it shows that 50% (36) of the companies reached $ 100M ARR at a pace between years 5 and 10. Most of these companies founded between 2000 and 2010, and the most well-known SaaS businesses that went to the public in 2019 fall within this category: CrowdStrike, Zoom, and Datadog

SaaS Businesses with hyper-scaling growth rate, which took less than five years to reach $ 100M, are list as follow:

NameShort descriptionStageMarketcap/ValuationFoundedCrossed $100M inYears to $100M
Dropbox Cloud StorageIPO7.72200720125
Elastic NVSearch ProductIPO5.94201220175
HortonworksBig DataMerged1.54201120154
SlackCollaborationIPO12.74201320174
Square Mobile Payment IPO30.06200920123
Pivotal Software cloud platform hostingAcquired2.7201220153

Those companies have grown with more than 170% YoY ARR growth rate to enter into $100M ARR, and it maintains such a high growth rate even after that ARR stage to sustain its success to join $1bn ARR clubs.

Your margin for error is very thin with that hyper growth mode

Even within the 100 SaaS businesses that are considered to be the most successful in terms of corporate value, there are a wide variety of different growth rates. When you want to create a top-performing startup based only on speed, the accompanying marketing and sales expenditures are inevitable, and the burn-rate can increase promptly given the characteristics of operating costs that must be executed in advance.

In addition to that cost perspective, it is important to understand that there are structural challenges that you may encounter that leave little room for mistakes in decision-making and that would be difficult to reverse in such a hyper-growing condition. There are also values ​​that are arguably more important than the growth rate if there are not many notable competition factors out there in the market; these values could be growth and stability of members, building a close relationship with your customers, etc.


The list of top 140 SaaS businesses by their valuation/market cap

NoNameShort descriptionStageMarketcap/
Valuation
Founded
1Salesforce.com Sales/Marketing CRMIPO161.411999
2ServiceNow IT ManagementIPO57.922004
3Shopify E-Commerce PlatformIPO52.112004
4Workday Finance and HR SoftwareIPO41.292005
5StripePayment processingPre-IPO352009
6AtlassianCollaborationIPO33.32002
7Square Mobile Payment IPO30.062009
8Veeva Systems Healthcare softwareIPO21.742007
9ZoomVideo ConferencingIPO20.982011
10Paycom Software HR, payroll and benefitsIPO16.971998
11Twilio Cloud Communication PlatformIPO16.782008
12RingCentral Cloud Communication PlatformIPO16.251999
13Okta Identity and access managementIPO16.012009
14DocuSign eSignatureIPO13.352003
15SlackCollaborationIPO12.742013
16CrowdStrike HoldingsCyber securityIPO12.612011
17SnowflakeCloud data warehousePre-IPO12.42012
18DatadogData monitoring and analyticsIPO12.052010
19XeroAccounting software platformIPO11.922006
20Ultimate SoftwareHR SoftwareAcquired111990
21Coupa Software Business Spend ManagementIPO10.972006
22Zendesk a customer service softwareIPO9.582007
23MongoDB NoSQL database programIPO8.872007
24Alteryx Data AnalyticsIPO8.111997
25QualtricsSurvey PlatformAcquired82002
26HubSpot Sales/Marketing CRMIPO7.822006
27Anaplan Planning toolIPO7.732006
28Dropbox Cloud StorageIPO7.722007
29DynatraceApplication performance managementIPO7.722005
30Zscaler information security companyIPO7.72008
31Paylocity cloud-based payroll and HRIPO7.31997
32Proofpoint Cyber securityIPO7.032002
33Wix.comWebsite BuilderIPO72006
34Avalara Tax Compliance SoftwareIPO6.732004
35MulesoftAPI managementAcquired6.52006
36TaniumEndpoint device cybersecurityPre-IPO6.52007
37SamsaraIndustrial IoTPre-IPO6.32015
38DatabricksData analyticsPre-IPO6.22013
39Elastic NVSearch ProductIPO5.942012
40Medidata Solutions Clinical Trials SoftwareAcquired5.81999
41athenahealth cloud-base Healthcare SoftwareAcquired5.71997
42RealPage property management softwareIPO5.461998
43PlaidFinancial infrastructureAcquired5.32013
44Smartsheet Work CollaborationIPO5.242005
45HashiCorpCloud infrastructure automationPre-IPO5.12012
46ConfluentData streaming platformPre-IPO52014
47VeeamData managementAcquired52006
48j2 Global Digital Media and SoftwareIPO4.981995
49ToastRestaurant softwarePre-IPO4.92012
50Five9 Cloud contact CenterIPO4.462001
51New Relic Application performance managementIPO4.282008
52MailchimpMarketing platformPre-IPO4.22001
53AppFolio Property Management SoftwareIPO4.192006
54LogMeIn Remote Access IPO4.182003
55Q2 Holdings virtual bankingIPO4.132005
56MedalliaSurvey PlatformIPO4.132001
57Cornerstone OnDemand  talent experience softwareIPO3.831999
58GustoHR, payroll and benefitsPre-IPO3.82011
59AppDynamicsApplication performance managementAcquired3.72008
60Ellie Mae mortgage applicationsAcquired3.71997
61FreshworksCustomer engagementPre-IPO3.52010
62Appian Low-code developmentIPO3.421999
63Everbridge Critical event managementIPO3.412002
64Qualys Cyber securityIPO3.331999
65ClouderaBig DataIPO3.322008
66RubrikData managementPre-IPO3.32014
67BlackLine Financial close process toolIPO3.22001
68CloudFlareWebsite infrastructure and securityIPO3.22009
69CanvaDesign softwarePre-IPO3.22012
70MimecastEmail protectionIPO3.082003
71SendGrid Cloud Communication Platform (Email) Acquired32009
72ProcoreConstruction managementPre-IPO32003
73AutomatticPublishing and ecommerce toolsPre-IPO32005
74NetskopeCybersecurityPre-IPO32012
75Pluralsight Online EducationIPO2.732004
76Pivotal Software cloud platform hostingAcquired2.72012
77GitLabDevOpsPre-IPO2.72011
78OneTrustPrivacy managementPre-IPO2.72016
79CelonisProcess automationPre-IPO2.52011
80CohesityData managementPre-IPO2.52013
81Box Cloud storageIPO2.462005
82UptakeIndustrial AIPre-IPO2.32014
83CollibraData intelligencePre-IPO2.32008
84CheckrAI-powered background checksPre-IPO2.22014
85TenableCyber securityIPO2.122002
86Carbon Black Cyber securityAcquired2.12002
87C3.aiAI and IoT softwarePre-IPO2.11998
88Instructure Education softwareAcquired22008
89WalkMeDigital adoption platformPre-IPO22011
90AvidXchangeBilling softwarePre-IPO22000
91ThoughtSpotBusiness intelligencePre-IPO1.952012
92Apptio IT Financial ManagementAcquired1.92007
93MINDBODY Wellness softwareAcquired1.92001
94InVisionDesign softwarePre-IPO1.92011
95monday.comTeam managementPre-IPO1.92012
96SurveyMonkeySurvey PlatformIPO1.741999
97SquarespaceWebsite builderPre-IPO1.72003
98CartaAsset managementPre-IPO1.72012
99ServiceTitanHome servicing softwarePre-IPO1.652007
100DataminrReal time alertsPre-IPO1.62009
101AppsFlyerData analyticsPre-IPO1.62011
102Adaptive InsightsPlanning toolAcquired1.552003
103HortonworksBig DataMerged1.542011
104SegmentData infrastructurePre-IPO1.52011
105JFrogDevOpsPre-IPO1.52008
106AsanaWork collaborationPre-IPO1.52008
107KeepTruckinFleet managementPre-IPO1.42013
108DataikuData science platformPre-IPO1.42013
1092U Educational technology IPO1.382008
110IntercomBusiness messagingPre-IPO1.32006
111Yext Business listing toolIPO1.272006
112AirtableSoftware creationPre-IPO1.12011
113OutreachSales engagement softwarePre-IPO1.12012
114SisenseBusiness analyticsPre-IPO12013
115Auth0Identity managementPre-IPO12007
116AppDirectSubscription commerce platformPre-IPO12004
117AcquiaDigital experience platformAcquired12009
118SeismicSales enablementPre-IPO12012
119TalkdeskCloud contact centersPre-IPO12009
120SMS AssistMultisite property managementPre-IPO12010
121Sumo LogicData analyticsPre-IPO12013
122RiskifiedEcommerce softwarePre-IPO12011
123BlendLending softwarePre-IPO12015
124IcertisContract managementPre-IPO12011
125Guild EducationEducation softwarePre-IPO12012
126VTSReal estate softwarePre-IPO12012
127PendoUser insight and communicationPre-IPO11995
128Zuora Subscription management toolIPO0.992007
129WeaveBusiness communicationsPre-IPO0.972012
130DataStaxCloud infrastructurePre-IPO0.972010
131MixpanelData analyticsPre-IPO0.872011
132BrazeMessaging platformPre-IPO0.852011
133AmplitudeProduct intelligence platformPre-IPO0.852009
134Grand RoundsHealthcare softwarePre-IPO0.752009
135WelltokHealthcare consumer activationPre-IPO0.632011
136PindropVoice-based securityPre-IPO0.62011
137GainsightCustomer success managementPre-IPO0.62006
138FuzeEnterprise communicationsPre-IPO0.42010
139Domo BI and visualizationIPO0.32009
140ChannelAdvisor eCommerce PlatformIPO0.222001

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